Capacity cuts on some main container routes will push up the inactive containership fleet to over 3m teu in the coming weeks, says Alphaliner.

That would practically double the previous peaks hit after the Hanjin Shipping bankruptcy in 2016 and during the global financial crisis in 2009.

Currently the inactive containership fleet stands at 338 units with a combined capacity of 2.12m teu.

That is slightly down from the previous record of 2.46m teu in March this year, according to Alphaliner estimates.

But carriers have unveiled a fresh round of blanked sailings that are scheduled to take place in the coming weeks.

The cuts are necessary to help liner operators manage the fall in demand due to the coronavirus.

Containership owners are expecting the coronavirus to rock supply fundamentals but to what degree is to soon to say.

Hapag-Lloyd, a German owner of 239 boxships, foresees "adjustments" to its fleet this year as it expects the virus to have a negative impact on demand, spokesman Tim Seifert said.

"If this happens we will have to make some adjustments to the network," he told TradeWinds.

"Please understand that it is too early to provide any precise details at the moment."

Hapag-Lloyd expects 2020 container volumes worldwide to fall 2.4%, however, from last year, according to Clarksons data cited in its 2019 annual report.

It also foresees a 0.5-percentage-point drop in gross domestic product to 2.4%.

"It is their daunting task to judge how much containership capacity is needed during the demand pullback, and also to be ready to service the market when the recovery begins, whenever that may be."

Global Ship Lease, which charters most of its vessels to French owner CMA CGM, did not return calls but frankly stated how the virus may lead to oversupply in an SEC filing.

"Notwithstanding scrapping, delivery of newly built containerships will likely result in an increase in the size of the world containership fleet over the next few years," the New York-listed company said in its 2019 annual report filed 1 April.

"An oversupply of containership capacity, combined with any decline in the rate of growth in demand for containerships, would be likely to result in a reduction of charter hire rates."

GSL said the company will most likely face a number of other virus-driven headwinds this year and next, such as extended layups and less business from CMA CGM.

If CMA CGM, or any other of our charterers, ceases doing business or fails to perform its obligations under our charters, our business, financial position and results of operations would be materially adversely affected by reduced operating cashflow," it said.

"If vessels were redelivered to us prior to the scheduled expiration of their respective charters, it is probable that, even if we were able to find replacement charters, such replacement charters would be at significantly lower daily rates and for shorter durations.

"If such events occur, these events may give rise to uncertainty about our ability to continue as a going concern."

Widespread cancellations

More than 250 scheduled sailings will be withdrawn in the second quarter alone, as carriers react to rapidly fading demand caused by the lockdown in several countries.

Carriers implemented an earlier round of capacity cuts in February that only lasted for two to three weeks and focused on China-related services.

But Alphaliner expects the next wave of capacity cuts will have more impact as it will last for two to three months and warned that no market segment will be spared.

The idle fleet is being further boosted by a large number of vessels sent for scrubber retrofits, with 1.02m teu of vessel capacity currently at the yards, the analyst estimates.

Capacity cuts were first limited to the major trades between Asia and Europe, the transpacific, and the transatlantic.

On some major trades between Asia and Europe, up to 30% of capacity is estimated to have been removed.

But carriers have started to implemented capacity reduction on other trades in South America, the Middle East, the Indian Subcontinent, Africa and Oceania.