Excess capacity could cause a new price war among container lines, warns Evergreen chairman

With a large number of newly delivered large container ships starting this year, if consumption does not keep pace with the growth of supply, container shipping companies could revert to a price war like pre-pandemic.

new container vessel of Evergreen

A new container vessel of Evergreen (Photo: Evergreen Marine)

The chairman of Evergreen, Chang Yen-i, warned that with the large number of newbuild mega-box ships starting to be delivered this year, if consumer demand does not keep pace with the growth of capacity, container shipping lines could return to the price war on shipping freight rates as before the pandemic. He made the statement at National Association of China Shipowners Chinese New Year celebration on Wednesday.

Evergreen itself has 49 ships with 463,442 TEUs under construction, but MSC, the market leader, has the largest orderbook, with 133 ships on 1.8 million TEUs being built, followed by Cosco (884,272 TEU) and CMA CGM (816,476 TEU).

Mr. Chang told the Taiwanese Shipowners Association: "After two years of amazing profits, the liner industry now faces three challenges. The first is the slowdown of international trade and the global economy; the second is the fall in container freight rates; and the third, the big number of new ships being built."

Since the beginning of the year, the Shanghai Containerised Freight Index (SCFI) has declined by over 2% compared to its highest level at the beginning of 2022, with the Asia-West Coast of America and Asia-Europe routes declining the most.

Mr. Chang said: "If the economy does not keep up with the growth of shipping supply, perhaps liner operators will embark on a price war, which is the unhappiest situation for our industry, unless we can significantly adjust the capacity. If the freight war continues, it may be difficult for earnings from the transpacific, Asia-Europe and other important routes to escape falling below breakeven levels. Even small shipping companies may have losses."

"If the Russia-Ukraine war ends, it is expected to bring relief to inflation and the energy crisis and [will] stimulate the market to return to normal consumption, which is the most important for the shipping industry."

Captain Chang, a highly knowledgeable mariner, was appointed as the Chairman of Evergreen in October 2020, after 30 years of working for the company.

Yang Ming Cheng Cheng-mount, the Chairman, also attended the event, told reporters that there was no indication of a strong economic recovery. He said: "Although China has abandoned its zero-Covid-19 policy and is acting to stabilise its economy, we can see that throughput in the container terminals isn’t significant, so it remains to be seen when the effect of the lifting of pandemic restrictions will boost the economy."

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Source: Phaata.com (According to The Loadstar)

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