The Idle Containership Fleet Is Shrinking
Having been one of the few (unwanted) fast-growing segments in the containership industry until recently, the idle containership fleet has since gone on a crash diet. This is welcome news for carriers as it means that the industry is getting healthier, with fewer unwanted assets draining costs.
Drewry’s latest Container Forecaster report highlights how the idle fleet (defined as inactive for at least 14 days) has shrunk from 1.7 million teu in November 2016 to under 500,000 teu as of June 2017.
There are a number of reasons for the sudden slimming down. First, a large proportion of former Hanjin Shipping units that were parked up almost overnight in the aftermath of its untidy bankruptcy have since either been scrapped or picked up by other owners and operators. When the Korean line abruptly exited the stage it left about 100 ships (owned and chartered) without gainful employment and added around 600,000 teu to the idle fleet, pushing it to a record level (when measured in teu as in 2009 it was higher as percentage of the total fleet).
By early June 2017 only 13 of the original Hanjin idled ships had not been redeployed, leaving approximately 100,000 teu idled. In the short time since we compiled the research for Table 1, five of the listed ships have found employment. Maersk Line has taken the SM Norfolk, SM New York, Athos and Adamastos, while MSC has fixed the SM Savannah.
Another factor that helped to shape a leaner idle fleet was the number of formerly inactive ships that were scrapped. From early December 2016 to the mid-March Drewry counted some 23 ships aggregating 76,000 teu that were scrapped out of idled positions. The level of scrapping has since slowed down as demand was suddenly rekindled for previously redundant ships (reducing the idle fleet further – temporarily at least) as carriers sought to fill gaps in their networks as they hurried to implement new alliances from 1 April, while demolition prices also softened.
From March to the end of June some 133 idle ships were reactivated with the majority (74) being deployed in the core east-west trades, primarily the transpacific. Another 30 vessels moved into the secondary east-west trades, with many placed on the Asia to India and Middle-East trades. Only 18 ships have moved into the north-south trades, but MSC has been active in taking the largest ships possible – including a couple of 9,400 teu ships that have been put into the ECSA routes.
Table 1 shows a clear preference for the bigger (and younger) ships, which again helped to lower the idle teu count. As of June there were just 12 ships of 8,000 teu or more idled (see Table 2), of which as previously mentioned five have since been reactivated. In early March there were 68 ships of 8,000 teu + at anchor. The least desirable ships tend to be in the smaller size segments with 152 of the total 178 idle ships below 5,000 teu. The outlook for these ships is grim – most likely they will either stay at anchor or wind their way to the demolition yards.
While the idle fleet is a good barometer of the overall health of the industry it is important to remember that last year’s peak and the recent toning down were skewed by one-off events i.e. Hanjin’s collapse and the alliance restructuring. It was never as bad as it looked last year, but the recovery has been aided by the temporary demand for filler ships that won’t last.
The short-term fixtures for previously idled ships means that they will once again soon become candidates to re-join the great unwanted, while the slowdown in scrapping will see more ships stay in the idle ranks. We expect the idle fleet to remain at about two to three percent of the total containership fleet throughout the summer, before rising slightly during the slack season that comes into play in the final months of the year.
The idle fleet will likely plateau for the rest of the year as some short-term fixtures are parked up once again, mitigated by some scrapping. This tells us that the industry is close to recovery, but is not quite there with still too many assets that are simply unviable.
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