Another 36 ships ordered! Handheld orders approach 1000! Trouble is brewing in the shipping market.

Record-breaking container ship order backlog is about to surpass 1000 vessels. Despite the "avalanche-like plunge" in the container shipping market, shipping giants who previously made huge profits have apparently not stopped ordering ships. With weakening market demand and the delivery of a large number of newly built ships, the container shipping market is facing enormous challenges.

Up to 36 vessels! Three major container shipping giants will order 10,000-TEU container ships from Asian shipyards.

According to Alphaliner's recent weekly report, at least three of the world's top ten container shipping giants are about to announce large container ship orders at Asian shipyards, including CMA CGM (ranked third in capacity), Evergreen Marine (ranked sixth), and Yang Ming Marine Transport (ranked ninth). Among them, Evergreen Marine is negotiating with shipbrokers to order 10+10 15,000-17,000 TEU new Panamax container ships.

Meanwhile, Yang Ming Marine Transport will order 5+5 15,000 TEU container ships. It is understood that Yang Ming Marine Transport initially announced in January this year that it would build 5 15,000 TEU container ships, and in April the board of directors agreed to build 5 dual-fuel ships independently, becoming the first container shipping company in Taiwan to build LNG-powered container ships. Yang Ming Marine Transport subsequently launched an international tender in the middle of this year, and the new ships will be delivered in the first half of 2026.

Yang Ming Marine Transport's tender attracted participation from major shipbuilders in China, Japan, and South Korea, and the chairman of Taiwan Shipbuilding Corporation, Zheng Wenlong, previously confirmed that they are negotiating with Yang Ming Marine Transport for an order of 5 15,000 TEU container ships. If this order is finalized, this will be the first time Taiwan Shipbuilding Corporation has built an LNG-powered ship.

Unlike other container shipping giants who placed large orders in the past two years, Yang Ming Marine Transport currently has no new ships under construction. Although its current capacity ranking is temporarily ninth, its order backlog is far lower than that of ZIM (ranked tenth) (43 vessels, approximately 378,000 TEU). Including the order backlog, ZIM's fleet capacity has surpassed that of Yang Ming Marine Transport.

In addition, CMA CGM is expected to place an order with CSSC for 6 15,000 TEU methanol-powered container ships, doubling its number of methanol-powered ships to 12. Rodolphe Saadé, CEO of CMA CGM, confirmed last month that if the board approves, the company will invest another US$1 billion to expand its methanol-powered container ship orders in China.

According to International Ship Network, CMA CGM reached an agreement with CSSC earlier this year to order 6 15,000 TEU methanol dual-fuel container ships. The new ships will be delivered in the second half of 2025, with each costing approximately US$175 million, and the total contract value reaching US$1.05 billion (approximately RMB 7.618 billion). This is the first time CMA CGM has ordered methanol-powered container ships.

In addition to 10,000 TEU container ships, the world's largest container shipping company, MSC, also reportedly plans to order a series of LNG dual-fuel 8,000 TEU container ships in October. MSC currently has the most new ships under construction, with an order backlog of 125 vessels and 1.7425 million TEU, equivalent to 38.1% of its existing fleet, and is approaching the fleet capacity of the fifth-largest container shipping company, Hapag-Lloyd (1.7825 million TEU).

Container ship order backlog to reach 8 million TEU, severe supply-demand imbalance in the next two years.

Alphaliner points out that if these potential orders are all finalized in the coming weeks, this will bring the global container ship order backlog to approximately 8 million TEU, equivalent to about 34% of the existing fleet capacity. In comparison, the previous peak of container ship order backlog was 6.6 million TEU in 2008, accounting for 60% of the fleet capacity at that time.

According to Clarkson's data, as of now, the global container ship order backlog totals 930 vessels and 7.4033 million TEU, equivalent to 28.89% of the existing fleet capacity. This year's total new container ship orders are 342 vessels and approximately 2.58 million TEU, which is lower than the peak level of 587 vessels and approximately 4.35 million TEU last year, but it has also set a record high since 2007.

Alphaliner predicts that next year, as many as 343 newly built container ships will be delivered and put into operation globally, with an increase in capacity of 2.3 million TEU, an 8.1% increase in capacity supply, but the estimated demand growth is only around 2.7%, resulting in a severe supply-demand imbalance. In 2024, an additional 2.83 million TEU of capacity is expected to be delivered, while deliveries in 2021 and 2022 were both around 1.1 million TEU.

Clarkson's historical delivery data shows that between 2001 and 2020, the average annual growth in container ship fleet capacity was 0.97 million TEU, while deliveries from 2023 to 2024 will be 2.6 times higher than the average level. The previous record for annual container ship deliveries was 1.7 million TEU in 2014, which is also far lower than the growth levels in the next two years.

The continuously increasing container ship order backlog has raised questions among many industry insiders about how the shipping industry will absorb the large amount of capacity to be delivered given the expected weak demand growth in the coming years.

A new report released by the United Nations last month warned that container trade has been the fastest-growing segment of maritime trade for years, but the growth rate is expected to be only 1.2% in 2022. Adverse macroeconomic factors, inflationary pressures that curb consumer spending, and pandemic-related lockdowns and developments in the Chinese economy are expected to slow down maritime trade. As consumer spending shifts more towards services, demand may also gradually normalize.

Drewry, a shipping consultancy, believes that container shipping companies face a huge challenge in controlling capacity supply, "The problem is that there is a lot of supply." If shipping companies choose to idle vessels to compensate for the weak demand in the coming years, idle owned vessels will still incur capital costs, while chartered vessels will incur charter fees.

One way to offset this impact is to scrap old ships. Drewry expects that shipping companies will remove as many old ships from the market as quickly as possible, and the scale of ship demolition in 2023 will approach the historical high. However, Alphaliner points out that the number of ships that can be scrapped may not be enough to bridge the supply-demand gap, and it is certain that younger ships may also need to be scrapped to alleviate the overcapacity.

In addition, shipping companies can also reduce speed, which will reduce fuel costs and emissions, and eliminate effective supply. Maersk CEO Soren Skou estimates that, driven by environmental regulations, slower sailing can reduce global fleet capacity by 5%-15% in the medium term.