CONTAINER lines are ordering ships at a pace that reflects remarkable confidence in the future of their market.

After six years in which pandemic disruption, port congestion and Red Sea diversions have repeatedly absorbed capacity and supported freight rates, carriers continue to commit billions of dollars to new tonnage. Lloyd’s List data shows 73 containerships, representing more than 1m teu, were ordered in September alone. This has pushed the global orderbook to almost 15m teu, or equivalent to roughly 43% of the existing fleet.

On one level, the investment is entirely rational. Much of the existing fleet is ageing, environmental regulations are becoming more demanding and carriers are under pressure to modernise around dual-fuel technology. Fleet renewal is not optional.

But shipping’s history suggests that periods of exceptional profitability often encourage investment decisions that look less prudent when market conditions change.

The key question is whether carriers are replacing capacity or expanding it faster than demand can ultimately absorb. When an orderbook approaches half the size of the existing fleet, that distinction matters.

Shipping history offers a cautionary tale. Strong markets have often encouraged aggressive ordering, only for economic shocks or slowing trade growth to expose a surplus of tonnage. The result is usually falling freight rates, weaker asset values and years of financial pain for both carriers and shipowners.

The risk today is amplified by the fact that recycling has almost disappeared.

Global containership capacity has expanded by 42% since 2020 to about 34m teu, driven by heavy newbuilding deliveries and exceptionally low demolition levels. Just eight containerships, representing around 18,000 teu, have been sold for recycling this year.

Meanwhile, the pool of ageing vessels continues to grow. Hundreds of ships are now more than 25 years old, while more than 1,000 others have already passed the 20-year mark. In previous cycles, many would have been heading for the scrapyard. Instead, strong cargo demand, Cape of Good Hope diversions and persistent operational disruption have kept them trading profitably.

That may not last indefinitely.

A broader return to the Red Sea and Suez Canal would reduce the additional vessel demand created by Cape routing just as a record wave of newbuildings enters service.

Unless trade growth accelerates sharply, the industry will eventually have to absorb both a near-15m teu orderbook and an ageing fleet that has so far avoided retirement. If that happens, recycling is likely to accelerate, driven less by weak markets than by the sheer volume of new tonnage arriving from shipyards.

Carriers can argue that today’s orders are about fleet renewal rather than expansion. But with the orderbook to fleet ratio so high, that distinction is becoming increasingly blurred.

Container shipping is not destined for another downturn. Yet the industry’s history suggests that periods of exceptional profitability often sow the seeds of the next correction. After years of disruption supporting freight markets, carriers may be discovering that the biggest threat to future earnings is their own enthusiasm for ordering ships.

Robert Willmington
Markets editor, Lloyd’s List

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