The major shipping companies are spending so much money to expand the transport capacity of their fleets as if the future of world trade were not uncertain. The last time that companies’ wallets opened up so much before buying ships was during the surge in demand for maritime transport during the coronavirus epidemic.
Cargo ship owners are using their increased profits in 2024 to build container ships for themselves. Some experts believe that shameless spending by some of the big multinationals that dominate the shipping container industry has begun, the Financial Times reported.
In total, there were orders for 8.4 million 20-foot containers on the books of shipbuilders in November 2024, according to data from shipping brokerage Braemar.
The record order book now exceeds the level after the outbreak of the coronavirus epidemic. Then, there was a sudden surge in demand for transport on the world’s seas, creating new demand. Meanwhile, the increase in tariffs provided the funds to buy new vessels.
Maritime carriers have a lot to spend
Container shipping companies have money to spend on expanding their fleet, says Jonathan Roach, container market analyst at Braemar. In an uncertain global economic climate, this could lead to overcapacity in the cargo holds of ships.
Companies’ appetite to buy ships jumped after 2023, when the 2020 rebels began attacking container ships sailing in the Red Sea with drones and missiles. This forced Asia-Europe routes to bypass Africa, bypassing the risky waters.
This pushed up transport rates, making it easy for companies to make profits. Leading the purchases is the Italian-owned Mediterranean Shipping Company, which placed orders for 107 container ships in November, according to figures. CMA-CGM follows in second place with 103 vessels for purchase.
Companies are not concerned about the uncertain economic environment
For the time being, companies do not seem to care much about risks. Firstly, it is not known how long the blockade of the Red Sea will last. What is quite predictable, however, is that Donald Trump, the future president of the United States, wants to pursue a fully protectionist economic policy, which could trigger a tariff war between countries around the world.
Before the terrorist attacks maritime container shipping companies were operating at a loss with much smaller fleets than they have today, said Peter Sand, senior analyst at market research firm Xeneta. Imagine what would happen if the companies’ ships were allowed to return to the Red Sea! According to the expert, shipping tariffs would hit rock bottom because of the huge overcapacity.
Looking at each company individually, each could have a reason to expand its fleet,” said Niels Rasmussen, an analyst at BIMCO, a major trade association representing shipowners. But looking at the sector as a whole from a distance, the increase in capacity seems a little excessive.
Soon there could be a nasty oversupply in maritime transport
BIMCO expects container ship capacity in 2026 to be 46 percent higher than in 2019. This was the last normal year before the covid demand surge. However, experts at the trade body believe that this supply of transport will only increase demand by 22 per cent compared to 2019.
The experts also warn that if Trump delivers on his tariff hike promises, there could be a greater imbalance in supply-demand than they forecast. This is not helped by the fact that many ships are being bought to replace their scrapped predecessors.
Under the Hong Kong Convention, which has been in force since June 2024, only shipbreaking yards with the appropriate environmental certification can process ageing container ships, slowing down their decommissioning.
A similar overcapacity in the shipping industry has emerged as a result of the bloated shipping fleets under the covid from 2022 onwards. In a sense, the sector is thus reeling from the Red Sea crisis, which is forcing container ships to bypass Africa. This has absorbed surplus transport capacity.
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