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BIMCO estimates 10% increase in the demand for containerships

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COPENHAGEN : BIMCO estimates the demand for containerships is expected to increase by 10 percent as of 2023 as shipowners move forward with the implementation of the IMO 2023 regulations,. Meeting Energy Efficiency Existing Ship Index (EEXI) and achieving a good Carbon Intensity Indicator (CII) rating is a hot topic in the industry that is likely to impact the demand and supply balance moving forward.

For older ships the main way of meeting the impending CII regulations would be by slowing down, putting greater pressure on the supply side amid likely adjustments of sailing routes.

“Congestion is likely to continue to be a driver of vessel demand and capacity supply for a while, but from 2023, the implementation of EEXI will likely be a more significant factor where vessel demand is concerned. In our last report, we estimated that EEXI could result in a 5% increase in vessel requirements due to lower sailing speeds. Since then, Maersk has announced that they are likely to need 5-15% more vessels, while Hapag-Lloyd estimates an increase of 5-10%. Congestion could dissipate in 2022 or by spring 2023 at the latest,” BIMCO’s Chief Shipping Analyst, Niels Rasmussen, said.

According to BIMCO’s data, no container vessel has been demolished so far this year, but the demolition activity is expected to resume during the rest of the year and in 2023.

“We expect it to be in the 200,000-300,000 TEU/year range, possibly higher if owners decide to demolish ships instead of paying for retrofits to comply with EEXI,” Rasmussen added.

Even though contracting has slowed down from an average of 358,000 TEU/month in 2021 to 248,000/month in the first seven months of 2022, the order book has still increased by 1.2 million TEU since the beginning of the year. The orderbook now stands at 7.0 million TEU, equivalent to 27.6% of the trading fleet.

The resulting deliveries are likely to considerably impact the fortunes of the container market over the next few years as about 5 million TEU will be delivered during 2023-3024. BIMCO’s total fleet growth estimate stands at 2.9% for 2022 and 8.0% for 2023.

“All in all, if we assume that vessel demand in 2023 increases by 10% due to EEXI, congestion reduces by 7-8%, the fleet size increases by 8%, and cargo demand increases vessel demand by 3-4% then we can conclude that the fleet supply/demand balance will worsen in 2023 and lead to lower time charter rates and second-hand prices,” BIMCO’s Chief Analyst said, adding that global economic headwinds are adding many risks to container demand.

“We, therefore, envisage a certain degree of ‘normalisation’ during 2023, with much less congestion and reduced vessel delays. While we predict a reduction in freight levels, we do not think that these will revert to the very low pre-COVID levels.”

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