The expansion of global container ship capacity, which is projected to grow about 50 percent by 2008, is likely to have a limited downward push on charter and freight rates, according to a Deutsche Bank Research study.
GENEVA — The expansion of global container ship capacity, which is projected to grow about 50 percent by 2008, is likely to have a limited downward push on charter and freight rates, according to a Deutsche Bank Research study.
The increased availability is not expected to fuel large price decreases because some of the excess "will be absorbed by capacity bottlenecks in major ports and other factors," the report said. Some ports, such as those on the U.S. West Coast, are "almost chronically overloaded," with ships sometimes waiting days before they can unload.
"Overall, we do not expect the rate level to come down by more than 10 percent over the next two to three years," Eric Heymann, author of the report, "Container Shipping: Overcapacity Inevitable Despite Increasing Demand," said in an interview.
"Nearly as much new capacity will come onto the market in these three years as in the six previous years," the study said.
Shipyards worldwide at the beginning of the year had orders for almost 1,230 container ships with a capacity of 4.45 million 20-foot equivalents units, or TEU — the standard maritime industry measurement used to count cargo containers, the report said.
Although freight rates have fallen recently from the previous boom levels, they are still above the low levels of 2001-2002 prices, the study found.
Heymann said he expected "demand to catch up with supply" by 2008 and predicted container shipping would expand faster than other forms of cargo shipping.
Heymann, based in Frankfurt, said containers have "a big-time advantage" for users and can cut as much as one week from shipment time compared with hauling the goods by traditional general cargo ships.
The growth in global trade and the large-scale shift of manufacturing industries from North America and Western Europe to lower-cost developing countries, especially China and other Asian nations, has also resulted in double-digit growth for container trade.
In 2005, global volume of container trade rose 11 percent to 114 million TEU, noted the report.
This shift is also reflected in the changes in the global ranking of container shipping now dominated by Asia, which accounts for 16 of the world's 25 largest container ports, seven of which are in China, six in Europe and three in North America. Between 1996 and 2005, container handling in Shanghai, the report said, increased "just under 820 percent, while in Shenzhen the increase was 2,650 percent."In 2005, the average capacity of a container ship was about 2,200 TEU, up from 1,250 TEU in 1990. The report highlighted that more than half of the planned new container ships have a capacity of 5,000 TEU or more and also pointed out that there are plans for ships carrying as much as 13,000 TEU.
But the report cautioned that with larger container ships, some ports "will not be able to cope." To avert such developments, huge investments are being made by operators, especially in Asia, in terminals and harbor facilities, the study said.
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