THE demise of ships of 4,000-5,000 TEU, 16 per cent of the world fleet, is feared in the aftermath of the opening of the expanded Panama Canal to larger ships in 2015.
Vessels in this range are likely to see an increased rate of scrapping, however, were half of the 2.8 million TEU available obliterated the prevailing situation of over-capacity would disappear.
Nineteen vessels between 4,000 TEU and 5,000 TEU were scrapped in the first quarter, compared to seven over the whole of 2013, and one at the very end of 2012.
Thirty four vessels between 4,000 and 4,999 TEU were inactive in the middle of April, compared to 40 at the beginning of the year, according to data from Drewry Maritime Research.
The continuous cascading of surplus panamax vessels into north-south trades is still contributing to over-capacity, and the problem is likely to get worse when the Panama Canal's new locks begin operations.
Surplus panamax vessels in this size range are also keeping charter rates low, making it easier for competing carriers to penetrate the markets more deeply, regardless of need.
On the other hand, the progressively delayed expansion of the Canal's locks has given north-south trade routes a welcome reprieve.
At present, 150 vessels between 4,000-5,000 TEU still use the canal between Asia and east coast of North America, and 58 others are deployed on Europe-west coast of South America and east coast of North America-west coast of South America trades.
In addition 377 vessels between 4,000 and 4,900 TEU are used on routes not passing through the Panama Canal, or laid up, so the transfer of even a small proportion of the remaining 258 vessels using the canal would cause a shock to the system.
Another sticking point is that the average age of ships in the sector is only 8.5 years, with 73 per cent of them being less than 11 years old. As many of the ships will depreciate over 15 to 20 years much book value will have to be wiped out, which many shareholders will find hard to accept.