Container sector bullish but downside risks could prompt slowdown

The time charter rates for post Panamax container vessels rose by 111% year-on-year in 2024, hitting US$73,330 per day, and has led to a huge uptick in newbuild orders and a slowdown in demolitions according to Veson Nautical’s 2024 End-Of-Year-Report. 

The report stated the bullish market conditions for the container sector are reflected in the time charter rates as well as the 76% year-on-year increase in new ship orders which witnessed 321 deals including options, compared with 182 orders in 2023.

“The container market experienced remarkable growth over the past year, driven by increased demand, rising earnings and a robust asset value resurgence across all sectors,” said Veson Nautical senior valuations and analytics analyst Nautical, Rebecca Galanopoulos. “Despite the large volumes of new vessels hitting the water, the situation in the Red Sea lent support to container freight rates by increasing tonne-mile demand. The potential de-escalation of hostilities would allow for Suez Canal transits to resume which could have an impact on demand.”

Ms Galanopoulos added if supply begins to exceed demand, there is the potential to scrap older vessels.

The report also stated the bulging orderbook for new container vessels was driven by Taiwan and Singapore in 2024, with 42 new orders each. Switzerland and China followed, with 36 and 34 orders respectively.

The highly attractive terms on price and availability being offered by Chinese shipyards meant they dominated the market, receiving orders for 259 vessels, equating to a market share of around 81%, South Korean shipbuilders secured 52 deals and Taiwan 12 vessel orders.

The report added the bullish conditions witnessed during 2024 also impacted demolition sales, with figures dropping by about 34% year-on-year as 51 vessels were sent to the breakers.