Red Sea Attacks Temporarily Increase Demand for Ships

The BIMCO Container Shipping Market Overview & Outlook for March 2024 has been published, and Niels Rasmussen, BIMCO’s Chief Shipping Analyst, highlights that ship supply is expected to grow on average 9.1% in 2024 and 4.1% in 2025.

Rerouting via Cape of Good Hope is assumed to impact the first half of 2024. Ship demand increases an estimated 9.5% in 2024 and falls 0.5% in 2025. The supply/demand balance is expected to tighten in the first half of 2024 but then weaken when ships can return to the Suez Canal routing.

According to the IMF, the world economy will grow slightly faster in 2024 and 2025 than in 2023 even though economies in the US, China, Japan and India will grow slower. Retail sales in the US and EU remain stable. US consumers continue to spend more and save less than before the pandemic. That could eventually change and hurt retail sales, says Rasmussen.

Attacks on ships in the Red Sea have forced nearly all container ships to sail around the Cape of Good Hope, adding 10% to average sailing distances and ship demand. Ship deliveries will hit a new record high in 2024, beating the record set in 2023. The fleet is expected to grow 14.9% between end 2023 and end 2025.

Time charter rates have increased 41% since December 2023 and average fixture periods have increased by three months. The rates could stay high for a while as liner operators look to secure sufficient tonnage to maintain services despite the longer sailing distances.

So far, second-hand prices have only increased marginally despite an increase in time charter rates normally being reflected in those prices. “We believe that this will continue to be the case, as liner operators can look forward to significant excess capacity once the crisis in the Red Sea has been resolved. That is because they prefer to cover increased demand by taking on time charter tonnage rather than buying second-hand tonnage.”

Recycling is expected to remain low in 2024 as the Red Sea situation increases demand for ships but increase in 2025.