Container Shipping Market Overview & Outlook

Supply to outpace demand in both 2024 and 2025

Q4 2023
Container Shipping Market Overview & Outlook Q4 2023
Highlights

Demand Supply Supply/demand

The IMF forecasts that the global Contracting of new ships continues at The fleet is expected to grow 8.8% in
economy will grow by 2.9% in 2024 a faster than normal pace and the 2024 and 6.4% in 2024. Due to lower
and 3.2% in 2025both 2023 and order book remains near the record congestion and slower sailing speed,
2024. The US and China are expected high. Capacity delivered during 2024 supply is forecast to grow 6.8% in
to slow down significantly vs. 2023. and 2025 will reach 5.0 million TEU. 2024 and 6.4% in 2024.

Global conditions for manufacturing Recycling of ships remains low. It is Growth in head-haul and regional
remain weak. The global expected to gather momentum trade volumes will recover. We
manufacturing PMI has been below during 2024 and 720,000 TEU is expect demand growth between 3%
50.0 for past eight months, indicating forecast to be recycled during 2024 and 4% in 2024 and between 3.5%
slowing activity. and 2025 combined. and 4.5% in 2025.

Retail sales in the EU and US have Supply will grow 6 pp faster than the The supply/demand balance will
remained stable. In the US, excess fleet in 2023 due to lower congestion continue to weaken and freight
savings amassed during COVID are than in 2022. Panama Canal rates, time charter rates, and second-
almost spent, potentially hurting restrictions have so far not delayed hand pries will come under further
retail sales in 2024. container ships much. pressure.

In the US, the inventory to sales ratio Year to date, container ships have on
for most sectors are back to 2019 average sailed 3.8% slower than in
levels, indicating that inventory 2022. In 2024, supply is forecast to
adjustments may have come to an grow 2 pp slower than fleet due to
end. further speed reductions.
Container Shipping Market Overview & Outlook
Supply to outpace demand in both 2024 and 2025

Demand In 2023, third quarter volumes performed A reduction in growth from 2.9% in 2022 to an
better than we previously predicted. In estimated 1.6% in 2023 in the Europe &
We forecast that global container volumes will particular, back-haul and regional trades Mediterranean region is the key driver of the
grow between 0% and 1% in 2023, and performed better, so we have lifted our lower global growth in 2023. The German
between 3% and 4% in both 2024 and 2025. expectations for the fourth quarter as a economy in particular has struggled and is
consequence of this. Our forecast for total full expected to end the year with negative growth
year volumes has therefore risen by 0.5 of 0.5%.
percentage points.

While our growth forecast for all trades in 2024

remains unchanged at between 3% and 4%, we
have lowered our forecast for head-haul and
regional trades by 0.5 percentage points to
between 3% and 4%.

For 2025, we predict overall volume growth of

between 3% and 4% while we expect growth of
between 3.5% and 4.5% for head-haul and
regional trades.
Combined head-haul and regional trade According to the International Monetary Fund
volumes are expected to grow 0.5 percentage (IMF), growth in the global economy is
points faster than the total volumes in both expected to slow to 3.0% in 2023 from 3.5% in The main reason for growth in 2024 and 2025
2023 and 2025 but in line with total volumes in 2022. The growth forecasts for 2024 and 2025 being forecast lower than in 2023 is that
2024. are 2.9% and 3.2% respectively. weaker growth than in 2023 is forecast for both
China and the US. On the other hand, the
Container Shipping Market Overview & Outlook
Supply to outpace demand in both 2024 and 2025

Europe & Mediterranean region is expected to their current levels. According to the latest nevertheless lower than the actual volumes
recover and return to growth above 2% in estimates, these excess savings may run out were in 2019.
2025. during the first half of 2024, which could in turn
result in a drop in consumer spending. As in the US, consumer confidence in the EU
Import volumes to North America are expected has improved but remains low. However, retail
to fall by between 5% and 6% in 2023 as head- sales have remained stable. Relative to 2019,
haul volumes during the first half continued the retail sales in 2023 are up 5% in the EU
low levels seen in the second half of 2022. The compared to nearly 15% in the US.
fact that imports are returning to growth in the
second half of 2023 is only because of the very
low 2022 volumes.

It is mainly due to the low first half volumes in

2023 that we forecast between 2.5% and 3.5%
growth in North American import volumes
during 2024. However, there is a risk that
growth will be lower, as consumer spending
may not be sustainable at current levels.

The latest data from the US Bureau of For the Europe & Mediterranean region, we
Economic Analysis reveal that, adjusted for forecast that import volumes will grow
inflation, US consumers are spending 11% more between 2% and 3% in 2023 after falling 8.0%
on goods and services than in 2019. However, in 2022. Growth in 2024 is expected to end at
between 2% and 3%, and between 2.5% and In the meantime, the manufacturing sector in
disposable income has increased only 1% and it
3.5% in 2025. Despite forecasting growth for the EU suffered and the manufacturing PMI for
is the excess savings amassed during COVID
that allow consumers to continue to spend at three years in a row, our forecast for 2025 is
Container Shipping Market Overview & Outlook
Supply to outpace demand in both 2024 and 2025

the euro area has remained below 50 since July stronger than expected Q3 2023 could lift regions are forecasted to contribute 40% of
2022. growth to 5.4% in 2023 and to 4.6% in 2024. growth in 2024 and 2025.

For both the North America and Europe & So far, the manufacturing PMIs measured by All three regions are expected to see more than
Mediterranean regions, our volume forecasts both Caixin and the National Bureau of 20% growth in import volumes from 2022 to
are lower than would normally be expected Statistics of China have hovered around 50 2025; a strong recovery after not showing any
given the forecasts for their economies. Both throughout 2023; sometimes above but growth between 2019 and 2022. With growth
areas have struggled with high inflation and frequently below. The most recent reading saw of between 8% and 9% in 2024 and between
high interest rates. Should inflation come under both PMIs slip to 49.5, indicating contraction. 9% and 10% in 2025, we forecast that the
control and interest rates begin to fall as a South & Central America region will see the
result, the growth potential in 2025 could end It is, however, worthwhile mentioning that the fastest growth in the coming years.
higher than in our forecast. OECD’s Composite Leading Indicator for China
breached the 100 mark in April 2023 and has As the head-haul and regional trades into these
Following a fall of 2.6% in 2022, we predict that shown consistent improvement. This points to regions are longer than the average, we
volumes into East and Southeast Asia will show future improvements in Chinese industrial estimate that ship demand has grown faster
moderate negative growth of between -0.5% output which could drive further improvements than volumes in the head-haul and regional
and -1.5% in 2023. Our forecast predicts in imports as well as exports. trades. We estimate growth in ship demand of
positive growth of between 2% and 3% in both between 2.5% and 3.5% in 2023 vs. the
2024 and 2025. Despite only contributing about 23% of global estimated growth in volume of between 0.5%
import volumes, the current growth drivers in and 1.5%. Ship demand will also grow
Despite an uneven recovery, the IMF still the container market are the Indian marginally faster than head-haul and regional
forecasts that GDP growth in China will hit the Subcontinent & Middle East, South & Central trade volumes in the coming years.
official Chinese target of 5.0% in 2023 but slow America and Sub-Saharan Africa regions. In
to 4.2% and 4.1% in 2024 and 2025 2023, growth to the three regions was nearly
respectively. The property sector crisis remains double the total volume growth and the
a key challenge but recent measures and a
Container Shipping Market Overview & Outlook
Supply to outpace demand in both 2024 and 2025

Supply The total fleet is expected to hit the 30 million Beyond changes to the fleet, supply has also
TEU mark in late 2024 and be 31.9 million TEU been impacted by changes in sailing speeds and
Our forecast for fleet growth in 2023 has been at the end of 2025. congestion.
adjusted downwards as it appears that more
ships planned for delivery in 2023 than
expected have been delayed until 2024. In
addition, recycling has progressed more slowly
than we expected.

We now forecast fleet growth of 7.0% in 2023.

On the other hand, we have raised our fleet
growth forecast for 2024 to 8.8% and estimate
6.4% in 2025.

Should slippage of deliveries from one year to

the next develop differently to what we
anticipate, then fleet growth in a specific year
may naturally be impacted, however, it should Despite the significantly worsened market Depending on ship size, sailing speeds have
not materially impact overall fleet growth conditions, shipowners have already reduced by between 2% and 6% so far in 2023
across the whole forecasting period. contracted another 1.5 million TEU so far in compared to the same period in 2022. The
2023. The order book has therefore reduced smallest and largest ships have reduced their
Recycling is therefore likely to have a greater
only marginally, with the order book to fleet speed the least whereas ships between 3,000
impact on fleet growth. We now estimate that
ratio remaining high at 27% and already now TEU and 12,000 TEU have slowed by 5% on
recycling will reach 180,000 TEU in 2023 and
including ships for delivery in 2028. average. Overall, we estimate that lower sailing
double that, 360,000 TEU, in 2024 and 2025.
speeds have reduced supply by 3% in 2023. We
Container Shipping Market Overview & Outlook
Supply to outpace demand in both 2024 and 2025

estimate that sailing speed will slow further in If they do, supply growth would obviously end Supply/demand
2024 and reduce supply by an extra 2%. lower.
Though container volume growth has obviously
Congestion has remained in check throughout been lower than many had hoped, it is the
2023, and even draft restrictions due to low supply side developments that are the market’s
water levels in the Panama Canal and the main challenges.
reduction in the number of transits through it
have not caused congestion to increase
significantly. We estimate that lower
congestion has added 8% to supply compared
to 2022.

In total, we therefore forecast that supply in

2023 will grow 5% faster than the fleet, 2%
slower than the fleet in 2024, and at the same
speed as the fleet in 2025.
We have previously estimated that lower Our supply growth forecast is therefore 12.0%,
sailing speed could reduce supply by 5% in both 6.8%, and 6.4% for 2023, 2024, and 2025
2023 and 2024. Despite the weak market respectively.
conditions, liner operators have not taken steps
to reduce sailing speeds by that much and we Supply is forecasted to grow at an average
have therefore also lowered our speed annual rate of 8.4% between 2023 and 2025.
reduction estimate for 2024. However, it is still Even at the best of times, ship demand would
an option for liner operators to further reduce not see similar growth.
sailing speeds to take supply out of the market.
Container Shipping Market Overview & Outlook
Supply to outpace demand in both 2024 and 2025

Our forecast therefore predicts that the Though we do not believe that liner operators growth could be seen in 2024 if central banks
weakening that began in 2022 and took hold in will be able to significantly increase freight need to take interest rates even higher to
2023 will continue also in 2024 and 2025. rates, we do believe that they will be control inflation. On the other hand, a lowering
significantly more focused on adjusting their of interest rates starting in 2024 could result in
operated fleet to actual demand. an upside for 2025.
On the supply side, uncertainties relate mainly
to recycling and sailing speed. Both variables
offer opportunities for owners to improve the
supply/demand balance. If recycling goes
higher and sailing speed goes lower the
weakening of the market conditions will be less
severe, however, it appears unlikely that supply
could grow less than demand.

During the first half of 2023, liner operators

seemed mostly content to maintain their
operating fleet, and freight rates tumbled That in turn could mean that the time charter
whereas time charter rates have been mostly market may bear more of the burden of the
stable. However, there have recently been weakening market fundamentals in 2024 and
signs that freight rates have gone so low that 2025 than it did during 2023.
liner operators are prepared to act.
Many uncertainties remain on both the
demand and supply side. Slower demand
Container Shipping Market Overview & Outlook
Supply to outpace demand in both 2024 and 2025

About BIMCO Contact Links

BIMCO is the world's largest international Niels Rasmussen Homepage
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members in more than 130 countries, nr@bimco.org LinkedIn
representing over 60% of the world’s tonnage.
Our global membership includes shipowners, Facebook
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BIMCO is a non-profit organisation. Twitter

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