World’s Idled Container Vessels Signal A Bet On China’s Recovery

To get an idea of how significantly global trade has stagnated, one need not look beyond idled container vessels — unused shipping capacity is close to the maximum level since quite a spike following the start of the COVID-19 pandemic.

But the place where the idled vessels are clustered shares insights into the industrial bets for a future rebound: a significant number is positioned close to China and is waiting for a reimagined flow of exports while the second-largest economy in the world recovers from its existing and stringent Covid-19 Zero restrictions.

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It makes sense to be close to the main export centres to be ready to go, explained Simon Heaney, the senior manager of container research associated with a maritime consultant named Drewry.

But where the idled vessels are clustered provides insights into the industrial bets for a significant rebound: a heavy number are positioned near China, awaiting a reinvented exports flow as the world’s second-largest economy strives to recover from Covid-19 Zero restrictions.

A slowdown in consumer demand — driven by relatively weaker economic growth and higher inflation — indicates fewer vessels are required for shipping items from Asia’s top-notch manufacturing hubs to Europe and the US.

According to Drewry, approximately 4.1% of the worldwide container fleet that can carry about 1.067 million boxes (20 feet) stayed idle in February 2023.

That’s nearly double the figure observed about a year earlier, and December’s almost 1.07 million boxes, the maximum capacity to be pulled out of service from 2020 (August).

Spot container freight prices have reportedly fallen to the lowest in two and a half years, making it a great time to take vessels off the fleet for much-needed maintenance.
Chartering schedules now are relatively less tight, and owners have been catching up on repair work, explained Sean Lee, the CEO of Marco Polo Marine Ltd.

Not all idled vessels are at the drydock. According to Bloomberg’s shipping information, a significant proportion of this new fleet is reportedly gathered close to China.

Other clusters might be found in Malaysia and Indonesia close to Singapore’s break-bulk container zone, near major trade channels.

Expecting a rebound

Owners have been positioning empty vessels close to where they think the demand to rebound is the fastest, explained Frank Andersen, the head of Asia associated with a maritime data provider named Shipfix. It is cheaper to park a vessel in China than close to Singapore, with significantly higher port fees.

It is uncertain how long it might take global trade to pick up. Although optimism grows for a dramatic economic recovery in China, the world’s greatest exporter of exports will not start rolling till demand recovers in the US and Europe, where inflation keeps weighing down.

The last time there were so many idled ships was in the initial part of 2020, when the Covid-19 pandemic swept worldwide and almost halted shipping. However, that turned around as consumers stuck at home soon turned to the e-commerce domain, kick-starting a scramble for ships of all kinds to transport their containers.

There are expectations that a rebound is coming. Maybe the ships will slowly get activated, even though that may take a few more months.

References: Economic Times, Bloomberg Tax, Newswav

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