The oversupply of vessels in the container shipping industry in 2024 is expected to lead to various strategies by container lines to minimize losses. Philip Damas, managing director of Drewry Shipping Consultants, outlined several methods that container lines may employ:

Blank Sailings: Container lines are likely to implement more blank sailings, where scheduled voyages are canceled to match supply with demand.

Industrial Use of Cancelled Sailings: There might be an industrial use of cancelled sailings, reducing the predictability of container ship departures.

Reductions in Ship Speed: Container lines may further reduce the speed of ships to optimize fuel consumption and operational costs.

Scrapping of Older Ships: The scrapping of the slowest and oldest ships is a possibility, resulting in longer transit times for shippers.

Suspensions or Cancellations of Services: Container lines may consider suspending or canceling entire services or loops to address oversupply.

Despite these measures, Damas predicts that the oversupply will lead to a collective loss of around US$15 billion for container lines in 2024, following an estimated collective profit of US$20 billion in the current year.

The approach that individual container lines take in managing the supply will depend on their priorities, whether it is protecting market share or the bottom line. Damas suggests that some container lines may sacrifice cargo volumes and market share to maintain profitability.

For shippers, Damas advises that the next year will be an ocean freight buyer’s market. While significant rate cuts may be possible, he warns that there will be a trade-off, with service reliability and levels likely to worsen.

Shippers renegotiating ocean freight contracts are urged to seek efficiencies and savings beyond freight rate reductions. This includes examining surcharges, reducing detention and demurrage costs, and carefully considering contract terms, especially related to “free time.”

Additionally, Damas highlights the introduction of new EU Emission Trading System (ETS) surcharges in 2024. The lack of transparency on how these surcharges will be passed on and negotiated is a concern, and shippers are advised to seek clarity and evidence about the justification of these charges.

In conclusion, shippers are encouraged to negotiate not only freight rates but also to scrutinize and understand all associated costs and surcharges, as well as prepare for potential challenges related to ETS surcharges in the coming years.