Diverging growth in the cargo ship fleet

Growth in the world merchant ship fleet has been remarkably steady in the past few years. But the expansion pace is picking up and looks set to accelerate modestly in 2025. Among different vessel types fleet growth is varying much more widely, and this divergent pattern probably will continue next year and beyond.

The main vessel categories – bulk carriers, tankers, container ships, and liquefied gas carriers – comprise over 90 percent of the entire world merchant ship fleet’s deadweight tonnes carrying capacity. Fleet development is mainly influenced by newbuilding deliveries and scrapping (recycling) volumes, which have varied greatly from year to year and as proportions of the existing fleet, and there have been contrasting patterns among the individual segments.

Enlargement rates estimated for this year (to end-December) vary between a minimal 1 percent for tankers and 10 percent for container ships. Bulk carriers and gas carriers could see 3 percent and 7 percent increases respectively. In a notable smaller segment, car carriers, an 8 percent increase may be seen. During 2025 tanker and gas carrier fleet growth may accelerate, while bulk carrier growth remains stable and container ship enlargement slackens. These indications are tentative because, amid apparently fairly reliable estimates of newbuilding deliveries, scrapping is surrounded by greater uncertainty and is much less predictable.

Highlights of fleet growth trends

A steady trend of annual growth rates in the world merchant ship fleet has evolved over the past few years. Capacity using deadweight tonnes as a common measurement averaged 3.4 percent growth annually in the five years 2019 to 2023. After growing by 4.1 percent in 2019, the growth rate varied between 3.0 and the 3.4 percent seen in 2023.

At the end of 2018 the merchant ship fleet totalled 1990 million deadweight tonnes, comprised of 100,500 vessels. During the next five years to end-2023 this total rose by 18 percent to 2348m dwt (109,500 vessels), based on Clarksons Research data. At end-2023 cargo-carrying ships formed 96 percent of the total deadweight (62,500 ships).

During 2023 the overall 3.4 percent annual expansion rate resulted from a wide range of outcomes among the main segments. The container ship fleet expanded by 7.7 percent, while the gas carrier fleet (liquefied natural and petroleum gas – LNG and LPG) grew by 6.5 percent. Lower growth rates of 3.1 percent in bulk carriers and 1.9 percent in tankers were recorded.

For 2024 estimates are still tentative, albeit assisted by provisional data covering the first ten months. Slightly faster merchant ship fleet growth than seen last year, at around 3.8 percent seems likely. Within this higher figure, a wider range among individual segments is predictable. As already mentioned, tanker fleet growth is likely to recede to 1 percent, while the bulk carrier fleet could grow by a steady 3 percent. By contrast faster expansion than seen last year is expected in the gas carrier and container ship fleets, at 7 percent and 10 percent respectively.

These varying growth rates were mainly a result of newbuilding deliveries, reflecting as usual orders placed in preceding years. In typical years scrapping – the second driver of fleet capacity changes – is a large partly offsetting element. But in recent years it has been exceptionally low, and has offset only a minor proportion of new tonnage being introduced.

Fleet growth ahead

Estimates for 2025 suggest that deadweight capacity growth in the world merchant ship fleet could slacken after advancing in the preceding twelve months. But segmental performances are likely to differ more noticeably, with some accelerating and some decelerating.

Calculations reflect known orderbook schedules, enabling actual newbuilding deliveries to be estimated, albeit rather approximately. For scrapping, forecast volumes characteristically are somewhat speculative, dependent on changing market influences which may be different to what is now envisaged, and subject to changing perceptions about the future market trend and sentiment influences.

Among the main segments, ideas that currently seem plausible point to 2025 growth rates in a range of 2 percent to 9 percent. Tankers are again at the low end at about 2%, slightly exceeded by bulk carriers at 3 percent. Container ship fleet expansion may halve to about 5 percent, while the gas carrier fleet accelerates to about 9 percent. Continuing the pattern of influences in 2024 and previously, these enlargements mainly reflect expectations for newbuilding deliveries. Based on present signs, although it is possible to envisage that scrapping may begin reviving, it seems that the extent to which higher volumes offset new tonnage will remain limited.

The foregoing broad guesses are informed by expectations that newbuilding deliveries in the bulk carrier, tanker, and gas carrier segments will be higher than seen this year, based on shipbuilding yard orderbook schedules with some adjustments to allow for ‘slippage’ and postponements. On a similar basis, container ship deliveries are set to fall. Potential for scrapping, currently minimal, to surge is a prominent feature following several years of relative inactivity. An ageing fleet, and tightening environmental regulations could hasten obsolescence. But clear signs of a return to more ‘normal’ (much higher) demolition volumes are still absent.

Looking further ahead the view of merchant fleet evolution in 2026 and later is more opaque. Yet some visibility is afforded by extensive forward orderbooks for specific ship types, extending the period of heavy newbuilding delivery volumes. In 2026 newbuilding deliveries of bulk carriers, tankers and gas carriers are expected to be higher than next year’s volumes, while container ship deliveries could decline but remain relatively large. These volumes may be accompanied by rising recycling activity.

Limited availability of shipbuilding berth slots will constrain the scale of additional newbuilding orders for delivery over the period immediately ahead. This constraint is likely to be especially noticeable for the larger sizes of more technically complex vessel types that have been heavily ordered in the past twelve months or longer, such as container ships and LNG carriers. Later, from 2026 onwards, more potential exists for further new orders to emerge.

Annual world orders placed provide an insight into prospects for newbuilding deliveries in the years following the ordering activity. High volumes of container ship ordering from 2021 onwards have been boosting deliveries since last year, while extensive LNG carrier orders from 2022 onwards began raising deliveries this year. Increased tanker orders in the past two years are set to start boosting deliveries in 2025.

Future fleet evolution is also indicated by data showing the entire global newbuilding orderbook expressed as a proportion of the extant world fleet. At the beginning of November 2024, statistics compiled by Clarksons Research showed that current orders were equivalent to 14 percent of the existing world merchant fleet’s deadweight capacity. This figure is three percentage points higher than it was twelve months ago, emphasising recent robust ordering activity. Most of the orders, 96 percent of the deadweight tonnage, will be built in the three main shipbuilding countries – China, South Korea and Japan.

Percentages for individual segments vary widely. At the low end of the range, the bulk carrier global orderbook is equivalent to 10 percent of the existing fleet while in the tanker segment 13 percent is on order. But elsewhere much higher proportions are visible. For container ships the figure is 23 percent, and for gas carriers (LNG and LPG), capacity equal to almost half the existing fleet at 47 percent is on order.

Shaping the future fleet

What are the characteristics of influences likely to shape the world merchant ship fleet in future years? Both familiar and novel influences will be evident. Traditional influences are the ordering patterns and resulting new ships entering the market, and the exit of old or uneconomic ships for scrapping. Augmenting these long-established drivers is the effect of tightening international maritime regulations, especially those related to cutting carbon emissions, affecting both new and existing ships.

Reflecting the shipping market’s unpredictable aspects, ideas about future fleet growth always have been partly speculative, and are now a more complex mixture of perceptions. In some segments regulatory changes unfolding have restrained newbuilding orders compared with what many observers would have expected to result when freight markets were supportive enough. Over the next few years reinforced regulations could greatly increase pressure to scrap older vessels, although currently it is difficult to estimate the timing and extent of this outcome.

An order for any type of newbuilding vessel is often based on an assumption of at least a twenty years trading lifespan and, in practice, 25-30 years is often the basis for investments. Amid this view of usable asset life justifying the cost of new tonnage, shipowners now seek assurances about what fuel and ship propulsion method will satisfy regulators (and vessel users) over the ship’s expected lifetime extending up to mid twenty first century. Avoiding premature obsolescence is a critical aspect. Uncertainty about future changes in regulations affecting use of alternative fuels evidently has deterred some orders, and this lack of clarity may persist.

Various alternative fuels designed to replace traditional oil bunker fuel and facilitate the decarbonisation of shipping are being considered. But in most cases extensive further research and development is needed to overcome problematical aspects of the new fuels, to ensure that the new technology enables these to be used safely as well as economically.

Among options being considered by shipowners, or already adopted in newbuilding orders several alternative fuels are at the forefront. Because of acute uncertainties surrounding some options LNG is proving the most popular and practicable, although it is widely seen as a ‘transition’ fuel since in standard form carbon emissions reduction is restricted. Newbuildings designed to use methanol or LPG also have been ordered, while ammonia has become more prominent even though toxicity is a problem and large engines able to use this fuel are not yet commercially available.

Maritime regulations are not the only imponderable aspect surrounding the evolution of the world fleet of merchant ships. Linked to the global objective of reducing and eliminating greenhouse gas emissions is the possible effects on cargo volumes carried. More than one-third of all world seaborne trade consists of oil and coal, fossil fuels which are likely to see sustained downwards pressure (‘demand depletion’) in response to aiming for decarbonisation goals. In the longer term and perhaps starting fairly soon demand for both oil and coal transportation could begin an extended declining trend. This negative prospect overshadows the tanker and bulk carrier markets, creating further uncertainty about required future fleet capacity.

What are the near-term fleet drivers?

Analysis of current newbuilding orderbooks – showing the pattern of timing of vessel completions and delivery to shipowners – provides a provisional indication of prospects for capacity additions and fleet growth in the near-term future. Potential further ordering, or identification of orders already placed but not yet recorded, could modify estimates. However, the impact on delivery totals for the twelve months immediately ahead normally is limited, because of insufficient time for completion of additional construction work even when vacant building slots are available.

Orderbook schedules are then adjusted to allow for ‘slippage‘, a consequence of delays, postponements and cancellations, usually a relatively minor modification. Estimates of actual deliveries result. Assessments of future fleet growth also incorporate forecasts of scrapping (recycling), a typically almost unpredictable element that reflects prevailing and changing market psychology and sentiment as much as fleet obsolescence.

Forecasts of net fleet growth in 2025 and 2026 – as outlined in the preceding ‘fleet growth ahead’ section – are based on conventional analysis, incorporating the newbuilding delivery schedule and scrapping estimates calculated. Although further newbuilding orders for delivery in those years may be identified or added, potential has already become greatly constrained as orderbooks for the next two years have grown.

The order schedule further ahead in 2027 and later appears less constrained, and there have been signs that more shipbuilding capacity is emerging in several countries. Nevertheless orders may remain somewhat restricted by ongoing uncertainty about alternative fuels and technology. Greatly increased shipbuilding prices over the past few years also act as a limiting factor.

Freight market changes in individual market segments, and changing perceptions of future trends, will heavily affect future ordering patterns through next year and beyond, and the newbuilding delivery volumes resulting. Such effects are not clearly predictable even if there are broad indications of how the pattern could unfold. Assumptions about changes in ship employment opportunities, markets and earnings for parts of most segments may need continuing modification, perhaps with occasional abrupt revisions.

Prospects for scrapping volumes in future years partly reflect assumptions about secondhand vessel values and scrap prices. Recycling sales also are expected to be affected by the evolving regulations governing carbon emissions. While the likely magnitude of decarbonisation regulation is becoming somewhat clearer, it remains difficult to estimate volumes and timing of demolition sales arising as a consequence. The full effects are expected to become more visible over a period of several years ahead.

Regulations already agreed at the International Maritime Organization for adoption in the world fleet of merchant ships, the energy efficiency existing ship index (EEXI) and the carbon intensity indicator (CII), were implemented at the beginning of 2023. Following earlier introduction of the energy efficiency design index (EEDI) for newbuilding vessels, the rules extend the greenhouse gas emissions reduction strategy and targets to the entire operational world fleet. A variety of technical or operational changes can be used to ensure EEXI and CII compliance.

For some older ships, complying with these rules may prove difficult or costly, or both. It has been envisaged that substantial scrapping is a likely result, but expectations that the process would become established and accelerate rapidly through 2023 and 2024 have not been fulfilled. This possible pattern remains a valid expectation for the years ahead.

Looking at world merchant ship fleet growth prospects for the next couple of years, 2025 and 2026, estimates of newbuilding deliveries are the most reliable – albeit still tentative – part of net capacity addition calculations. Currently it seems realistic to envisage only a limited but gradually increasing offset from recycling activity, thereby prolonging the fairly steady fleet growth trend seen in recent years. But slower expansion amid much higher scrapping remains a possibility.
Source: Richard Scott, committee member, London & South East Branch, Institute of Chartered Shipbrokers, on behalf of Hellenic Shipping News Worldwide (please contact at [email protected] if you have any comments or questions)