Capacity Deluge Threatens Container Lines Despite Rate Resilience

Container shipping operators begin 2026 confronting a structural oversupply crisis that threatens to persist until the decade's end, with vessel order books swelling to unprecedented levels even as demand growth falters and carriers prepare for potential Red Sea route normalization.

The global fleet now carries an order backlog equivalent to more than 30 per cent of active capacity, totalling approximately 9.6 million twenty-foot equivalent units according to maritime analysts. Whilst deliveries will moderate slightly this year to 1.7 million TEU from 2.1 million in 2025, a tsunami of new tonnage approaches: 2.8 million TEU in 2027 and 3.5 million in 2028, concentrated heavily in the final year.

Carriers continued ordering aggressively through 2025 despite weakening market fundamentals, placing contracts for 2.3 million TEU in the year's first half alone. Mediterranean Shipping Company and CMA CGM each maintain order books exceeding 100 vessels, whilst China's COSCO and Taiwan's Evergreen have committed to capacity expansions surpassing 30 per cent of their existing fleets.

The enthusiasm for newbuildings reflects carriers' decarbonisation imperatives and shipyard financing terms as much as genuine demand forecasts. Recent orders emphasize dual-fuel capability for liquefied natural gas or methanol propulsion, positioning operators to comply with tightening International Maritime Organization emissions standards whilst hedging against uncertain regulatory timelines.

Compounding the oversupply outlook, vessel scrapping has collapsed to negligible levels. Merely 5,454 TEU entered recycling facilities during 2025's first half, down from 48,600 TEU across the same 2024 period, as operators retain aging tonnage to capitalize on elevated charter rates and postpone capital-intensive replacements.

European-headquartered Braemar projects average overcapacity will reach 27 per cent through 2028, with this year registering 18 per cent surplus and 2026 climbing to 19 per cent before the deluge arrives in subsequent years. Demand growth, meanwhile, is forecast at barely 2 per cent annually, tracking global GDP expansion rather than the robust throughput increases carriers require to absorb incoming capacity.

The structural imbalance poses particular risk should Houthi attacks cease and Red Sea transits resume at scale, potentially flooding markets with the roughly 170 vessels currently deployed on extended Cape of Good Hope routings. Industry profitability is expected to reach its nadir in 2028 when peak deliveries coincide with normalised routing patterns.