By Robert Gultig

Slowing consumer demand due to the global recession and record high purchases of new vessels for 2023 delivery means a massive oversupply. Therefore, container shipping rates will collapse! The shipping industry is doomed… right?

That theory is growing in popularity, but Drewry, one of the leading consulting firms in the industry, does not foresee that.

Drewry’s expectation for 2023 is for ocean freight to post an earnings before interest and tax (EBIT) of $100 billion. That’s down 64% from his 2022 EBIT guidance of $275 billion, but it’s still well above pre-pandemic earnings.

Not quite a hard landing from a pre-covid perspective. For 2023 Drewry sees demand growth of 1.9%. However, on the supply side, in theory, if all new ships are delivered on time and there are no port congestions or scrapping, that equates to a “substantial” 34% increase in capacity year-on-year.

Port congestion is a side effect of supply chain problems and is not actively pursued by carriers, but it does have a significant impact on vessel/container supply. Drewry estimates that congestion will deplete 15% of effective capacity this year and 6.9% of effective capacity next year

While shipping lines may have no way of controlling demand, they do have a few ways of controlling supply.


There have been a number of “cancelled” departures in the last few weeks. Spot rates are still dropping but not dropping as fast as it was a few weeks ago, according to the Drewry Index.


Shipping lines will be sending old ships for scrapping. Drewry’s expects shipping lines to scrap 2.5% of the fleet capacity by the end of 2022. This would be the second-highest annual scrap volume ever.


Another way shipping companies cut capacity is to delay the delivery of new ships. Already, construction delays keep “moving” delivery dates further out every month.


Another way shipping companies can manage capacity is by temporarily decommissioning ships. Idling was one of the key tools used in 2009 to combat the collapse in demand caused by the financial crisis. In 2016, 6.6% of tonnage was berthed. 6% of tonnage was scrapped in 2020 (almost all in the first half) as a result of COVID lockdowns. According to Drewry, 3.6% of the tonnage was unused in September this year.


One of the most commonly cited means of supply is slow steaming. This removes capacity through slow sailing as a price support strategy or to “comply with environmental regulations”.


Add all these factors together (scrapping, cancellations, order delays, idle ships, slower shipping speed and port congestion) and Drewry’s best estimate is a 11.3% capacity increase. This is still a lot of additional supply in a contracting market. However, hidden departures and canceled services has already started.

By: Robert Gultig – International Trade Specialist

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