This Week's Focus: Overcapacity in maritime transport

This Week's Focus: Overcapacity in maritime transport


The bankruptcy of the Korean shipping company Hanjin Shipping has shown overcapacity in the sector and the difficulties of companies to survive in it.

In the last 3 years they have been built and commissioned 42 boats transporting high-capacity containers, with an aggregate volume of more than 685,000 TEUs (standard containers 6 meters long). Equivalent to 3% of the total capacity of freight containers in today's world.

The new ships, higher capacity, reduce unit operating costs per container transported to be more efficient in fuel and carry more cargo.

The direct consequence is increased competition and reduced the price of sea freight, hampering the long-term financial viability of the least efficient companies.

In recent years, the price of transport has moved relatively as fuel prices, reflecting an inability to improve margins sector.

However, prices are far from the levels reached before the financial crisis, with the boom of globalization and world trade, thanks to economic growth in China and other emerging converted into factories manufacturing world.

The main shipping lines operating well below its operational potential, highlighting overcapacity in the sector. This is especially noticeable in vessels of less tonnage, with more than 200 vessels over 3,000 TEU of unemployed capacity. In total, according to Alphaliner, ships with a total capacity of 1.48 million TEU are unused, equivalent to about 7.4% of the total capacity of freight in the world.

The possible consequences of bankruptcies like Hanjin are also bad for those affected by the goods on ships, bad news for banks that finance the construction of cargo ships.

The good news is that, apparently, the sector has noted that needs to reduce its operational capacity.

If the sector continues to suffer from overcapacity for a long time, this could be another chapter in the crisis in the banking sector.