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The delayed impact of the box-ship investment rush two years ago will put even more pressure on freight rates in the second half, with the global capacity injection through newbuildings expected to reach 615,000 teu (20 ft equivalent units) by the end of the year.

According to shipping report Crows Nest - Monthly Outlook, compiled by investment bank UBS Warburg, the influx of capacity will gather steam in the second half, with a monthly average of 60,900 slots due for delivery until the end of the year.

There will be no let-up next year, with capacity injection projected to be 7 per cent higher than this year.

While the pure gain in box slots is projected to be 10.1 per cent this year and 9.6 per cent next year, as new vessels replace smaller ones, while others are scrapped, overcapacity worries are destined to keep shipping executives' brows furrowed.

'We think it will take 5 per cent to 6 per cent annual growth in trade just to maintain the status quo rates-wise,' one of the report's authors, David Lepper, said.

But planning liner strategies by factoring in that level of compensatory trade growth would appear to be wishful thinking.

The report found overcapacity drove freight rates on key sectors of the Asia-Europe down 9 per cent in June. Annualised growth on the transpacific trades slowed to 1.4 per cent in the first half, and on the transatlantic there was a 2 per cent shrinkage.

The comparative data may have been posted during a bull year for the container trades, but the warning signs are flashing.

'The comparison against 2000 in part probably makes this year look worse than it is,' said Mr Lepper.

'But the last time we had a downturn, in 1997, the rest of the world was doing fairly well. This time, the downturn is coming from more than one set of economies. And it is not over yet.'

An example was Taiwan, a key source and destination for deep-sea cargo. In July, it reported year-on-year declines in containerised exports of 28 per cent and in imports of 32 per cent.

The United States-based Journal of Commerce Trade Horizon's report projects the growth in US containerised imports from northeast Asia to plunge to less than 3 per cent by the end of the year, compared with 15 per cent last year.

China, with its 9 per cent year-on-year growth of exports to the US, is the lone bright spot in the region, but even that single-digit expansion pales compared with the 35 per cent annualised growth it posted last year.

Hong Kong, Japan and Taiwan, Asia's key high-value exporting nations, are expected to post negative growth.

Managers from the Far Eastern Freight Conference's (FEFC) member lines have scheduled a meeting in Shanghai in the middle of this month to again try to hammer out a way to reduce capacity on the Asia-Europe trades, following their failure to implement suggestions put forward in Hong Kong two months ago.

They will try to negotiate a way to reduce capacity on the trade by 20 per cent. A strategy, if agreed, is to be implemented by October 1. But industry watchers think consensus on a plan of action will be hard to reach.

Some of the challenges include: reducing capacity while maintaining scheduling integrity; setting the new rates without falling foul of the European Union's anti-competition rules; getting non-FEFC member lines, which move about 30 per cent of the trade, to co-operate; and finding a balanced-reduction formula.

If capacity reduction efforts prove elusive, another rationalisation may be just around the corner for the container-shipping industry.

'We feel there is another selling wave coming when all the horror stories come out in the open,' the Warburg report warned.

'We would not be surprised to see a couple of bankruptcies in the sector.'



New tonnage after box-ship investment rush weighs heavily on the freight-rate equation