Unfortunately for portfolio investors, the shipping companies, much like the mining companies, don't put this understanding into practice all that often and continue increasing supply in an attempt to gain market share.
Both industries have had a couple thousand years to observe the cycle but it still happens.
Maybe MSC can retire enough of their smaller, less efficient ships to offset the arrival of the 23,000 TEU behemoths that are joining their fleet. Ditto for CMA CGM and their 22,000 TEU newbuilds. Since they are privately held they are probably more cognizant of the value of the capital at risk, sort of like investment banks back in the partnership days.
From World Maritime News:
Drewry: Box Spot Rates Rise amid More Idle Ships, Bunker Surcharges
The container spot freight market have rebounded amid a growing number of idle ships and new bunker surcharges, in what has been a mostly disappointing year for ocean carriers, according to shipping consultancy Drewry.
Drewry’s World Container Index, a composite of eight major East-West trades, in the past two weeks has swelled by USD 210 to return losses accumulated over the prior two months....MORE
Since the mid-point of this year spot rates have been significantly down on the corresponding period in 2018. This is less a reflection on the current market and more to do with what happened last year, when the U.S.-China trade war super-charged freight rates. Therefore, spot rates in the second half of 2019 were virtually destined to look very weak in comparison to an artificially inflated market, Drewry explained.
“Today’s market is not in full bloom, but it certainly is not as bad as it initially appears. In our opinion the lower prices of the third quarter of 2019 were a consequence of a diminished trade-war multiplier and a return to the rate cutting tendencies by some carriers.”
“The current freight revival is unlikely to have come from an unexpected demand boom. Volumes were moribund in the third quarter peak season and judging by the continued heavy use of void sailings by carriers that situation hasn’t changed dramatically.”
Instead, it is changes on the supply side that are driving the upwards momentum. The idle fleet has skyrocketed with just over 1 million TEU, or 4.5% of the total cellular fleet, out of action as of the first week of November....
