Many traditional shipping names will disappear as a result of a shake-up in the container ship industry, brought about by overcapacity, slower global trade and a widened Panama Canal.

That is the view of Jens Alers, group director of Bernhard Schulte Shipmanagement (Bermuda), which has offices in Par-la-Ville Road.

He said a rebalancing of the sector was “in full swing”, but he believes some well-known companies will vanish from the scene as a consequence.

Economic turbulence is battering the sector, and has led to a number of casualties, most notably the bankruptcy of Hanjin Shipping, the world’s seventh largest shipping line.

Newly-built container ships are coming into use, increasing capacity by an estimated 6 per cent each year, even as the sector tries to get a grip with a changed economic picture and scraps older vessels at a record level.

“The container shipping industry has no choice. It is vastly overtonnaged as a result of the unprecedented newbuilding ordering binge between 2000 and 2008,” said Mr Alers.

The sector was rocked by the global financial crisis in 2008, but steadily recovered until “the China bubble deflated” in 2014, explained Mr Alers.

“In 2016, for the first time in 15 years, world trade will grow at a slower pace than the world economy. At the same time container vessels larger than ever before are still being delivered by shipyards in the Far East,” he said.

“The cascading effect, which describes the replacement of smaller ships by larger and more efficient ones, is in full swing in almost all size sectors of the container fleet.”

The World Trade Organization estimates global trade growth this year will be 2.8 per cent this year, improving to 3.6 per cent next year, but still well below the 5 per cent average since 1990.

In June, the Panama Canal expansion project was completed. The waterway linking the Pacific and Atlantic oceans has been widened to accommodate larger container ships. The larger ships boast greater economies of scale and are displacing the Panamax container ships that were once the largest vessels able to navigate the strategic waterway.

While the sector has hit a rough patch, it is not all bad news. There has been pragmatic action by shipping companies, with vessel demolition rates at an all time high, four times above what it was last year. This has been described as a “positive surprise” by Bimco, the Baltic and International Maritime Council.

Peter Sand, Bimco’s chief shipping analyst, said: “It is important that the demolition of excess capacity comes sooner rather than later, as there is still a huge delivery schedule hanging over the container shipping industry for the rest of this year and well into 2017-2018.

“However, the high demolition activity is currently softening the net supply growth rate of the container shipping capacity and will prevent a darker outlook for the years to come, if maintained.”

Almost half of the vessels being scrapped are Panamax container ships.

Mr Alers said it was not only older ships that were being sold off; newer ships are being scrapped many years before they would normally be put out for demolition, at a significant financial loss to the owner.

The most striking example was a report last week that Rickmers Maritime Trust had sold the India Rickmers, a seven-year-old Panamax containership, to be scrapped. That would set a new record for the youngest box ship to go for demolition. Responding to the report, RMT, which is a non-operating container ship owner, said it had not yet decided on whether to sell the ship.

RMT is in a hard place as it has a fleet of 16 Panamax container ships, the category of ship being squeezed out by the newly-built larger vessels now able to navigate the Panama Canal.

Mr Alers said: “This class of vessel [Panamax] is now pretty much obsolete since the larger new Panama Canal locks can accommodate ships with an intake over 10,000 TEU.”

Before it was widened, the Panama Canal could only accommodate ships with a capacity of about 5,000 TEU, or 20-foot equivalent units.

Bimco noted that, in tandem with the record level of ship scrapping, there has been a noticeable slow down in orders for new ships to be built. Newbuilding contracts are at their lowest level in 20 years.

Analyst Mr Sand said: “The events in 2016 have shown that the tools to turn the container shipping industry around are being used and are working. The recommendations to consolidate fleets and demolish ships are being taken serious within the industry.”

Meanwhile Mr Alers said: “Participants in the container markets have to act fast to stop the ‘bleeding’. Consolidation between the large operators is progressing at a previously unseen pace.”

He pointed to a number of takeovers and mergers this year, including a decision likely to be made today on whether the Hamburg-Sued company is sold.

Mr Alers said Bernhard Schulte Shipmanagement is not involved in any ship scrapping. The company looks after 600 ships and 20,000 employees. It manages tankers, container ships and VLCC, or Very Large Container Ships.