We've been dying to use this title.  Growth has decelerated  in the long term. In essence, we are in Year3 of China's export story deceleration. And yet, the US has been recovering alittle better than expected for 6 months and Europe has stabilized a little. Arecovering US economy has raised a lot of hopes, but this is not an ordinaryrecovery by any stretch, not in terms of economic activity and neither in termsof container shipping.

For some time, the bad news has been that there are too manyships. The silver lining is that there are too many of the wrong ships outthere. But to get to the silver lining, we still need the consolidation of thecoming years. Keynesian over-spending has not helped, as it has kept demandartificially higher, which may offer false hope to owners of certain vesseltypes.

Some vessel owners and operators have pointed out that theaverage useful life of vessels in the upcoming years could fall to 20 yearsfrom 25 years. Of course we are not going to get accountants and owners torecognize this. But effectively, there are many ship types that could head tothe scrap heaps given small nudges. Many ships in the range of  5,000  ' 6,000 TEUs could be severely marginalizedif they consume too much fuel or are owned by financially weak owners. At themoment, according to Alphaliner and others, we are at about 1m TEU of idledvessel capacity, against a standing fleet of about 15.5m TEUs, according toMarch 2012 Clarkson data.

Here is what the fleet growth looks like long term. Thedotted red line is the long term trend while the bold red line is the actual capacitydata. The problem  is  the bold line exceeds the long term trend, justas demand decelerated globally,  meaningthe problem is not fully over unless demand really takes off (and more vesselsare taken out). We may have strong players come out better, and we may have rebounds, but full cleansing isstill needed.

Source: OSK188