The recent rise in the value of freight rates in the transport sector containerised shipping, mostly attributed to the effects of the geopolitical crises, has heightened uncertainty about the forecasts of the evolution of this market, with some observers whereas this is a phase of stabilisation of tariffs and others consider the recent surge to be ephemeral. Between the latter, Danish Ship Finance (DSF), a Danish company specialized in financing in the shipping sector, provides that over the next 12 months, the value of freight rates in the containers could fall to historic lows.

In your latest analysis of the shipping market, referring to to the container shipping segment, DSF highlights whereas in this sector, the capacity of the fleet is doubled between 2010 and 2023, while at the same time the volumes of containerised maritime traffic grew by +49% and During this period, the growth in demand for container transport depending on the distance, it was only +40%. The document specifies that the excess capacity of the fleet is expected to increase during the second half of 2024, probably putting considerable pressure on both the value of freight rates and and second-hand ship prices.

Focusing on recent market dynamics, the analysis of DSF notes that the volumes of containerised transport have increased not only in 2020 but also in 2022, while the fleet continued to increase. To cope with overcapacity of the cargo hold, maritime carriers have reduced the average speed from 17.3 knots in 2010 to 13.9 knots in 2023 in order to reduce the transport capacity of the fleet and make it more efficient use. The analysis finds that during the the first years of the current decade, the combination of the effects of the strategy to slow down the browsing speed, infrastructure bottlenecks and other disruptions excess capacity and the recent redirection of vessels deployed on services through the Suez Canal to the Cape of Good Hope first quarter of 2024 an 8-10% increase in global demand depending on the distance, an increase that is particularly sensitive for larger container ships used between the Far East and Europe, with almost 85% of these units which are diverted on the route around Africa.

According to DSF, however, these effects are short-term and Soon they will no longer be able to mask the gap between supply and demand. The Danish company believes that this It will probably happen as early as the second half of this year, and this is mainly due to the release of the market for new vessels. The large orders for new units ship charters issued by shipowners during the Covid-19 pandemic - explains the analysis - have pushed the order-to-fleet ratio beyond the 20%. In this context, in the coming years, the number of Larger container holders, with a capacity greater than 15,000 TEUs, will record a growth of more than +50% and Currently, only 24 of the ships in this capacity segment are more than ten years old, while the order book It contains 182. DSF analysts predict that in the near future the ocean carriers will return excess capacity to the companies that charter container ships and at the same time will transfer larger ships to sea lanes currently sailed by smaller capacity vessels.

Noting that the outlook for freight rates and ship prices are burdened by the extraordinarily high influx of new container ships with delivery scheduled in 2024 and 2025, the analysis notes that previous periods of overcapacity have led to It has been shown that the value of freight rates can drop by -80% over a period of 12 months, while the prices of second-hand ships can drop by -63%. According to DSF, in the next 12 months, freight rates could fall from the current position of the cycle to 85° percentile (Shanghai Containerized Freight Index at 1,800 in April 2024) at an all-time low, while the prices of used ships could fall from the current position of the 52nd cycle percentile at an all-time low.

With regard to the demand outlook, the analysis explains whereas while a +4.1% growth in sales volumes is expected in 2024 containers transported by sea, the greatest use of sea routes will elevate demand growth in distance function to more than +9%. In particular, it is expected that whereas intra-Asian trade will grow by +3.9%, contributing to one-third to the growth of the overall volume, while it is estimated that routes between the Far East and the United States will grow by +6,5%. In addition, import volumes are expected to will support much of the increase in the distances of the travel. As for the main routes from the Far East Europe, the analysis states that growth of just over +1% in both 2024 and 2025.

Highlighting that in the second half of 2024, the excess of Fleet capacity is set to grow progressively, and that this is likely to lead to significant pressure on freight rates and prices of used vessels, The analysis concludes that over the next 12 months, the value of tariffs could fall to historic lows if capacity will not be handled carefully and that, as it is likely that carriers opt for short rental periods, particularly The scenario will become difficult for companies that charter their ships, which they could see reduced drastically increase their revenues.