Container ship charter market heading back to earlier lows as unemployed fleet swells. Sluggish traffic growth puts liner operators under pressure
Charter hire rates for container ships are spiraling down fast now amidst a lack of tonnage requirements[ds_preview] by container lines after the end of the peak shipping season. According to the New ConTex, average market rates for ship classes between 1,100 and 4,250TEU are down a whopping 12.7% month-on-month as this issue of Hansa goes to print. Hence the rate of decline has increased nearly threehold compared with September.
As a rule of thumb, the bigger a tramp container ship is, the bigger the rate reductions it is facing. Although oversupply of large ships in the charter market is quite common during this time of the year, the seasonal problem is currently compounded by a poor trade outlook. Growth forecasts for global container traffic had to be revised down continually this year and liner operators are now withdrawing or cutting back more service capacity, operated with larger charter vessels, than expected. As of 5 October, Paris-based Alphaliner counted 245 container ships with an aggregated capacity of 780,000TEU as »idle« – which was 450,000TEU more than three months earlier. The idle fleet comprises both liner-controlled tonnage without service assignment and charter-free tramp vessels.
The post-panamax class continues to be the main victim since there are next to no orders for ships from charterers while the list of spot/prompt units is getting longer week by week. Over 40 post-panamax tramp ships are reported to be in search for new charter cover which explains why charter rates have been falling so rapidly.
Earlier in the month, Maersk Line was reported to have extended the 5,908TEU »Folegandros« at only 8,300$/day for 3–12 months for its Middle East/India service. Around a fortnight later Hapag-Lloyd was able to fix a larger vessel, the 7,241TEU »Adrian Schulte«, at even a lower rate of 8,250$/day for 2–5 months of transpacific trading, it was reported. As one chartering broker observed: »We are now seeing quite a few owners seriously considering to put their vessels into cold lay-up as this seems to make more economic sense.«
Wide-beam enthusiasm waning
The market for wide-beam over-panamax ships has also cooled off, with a few ships reportedly in spot position in Asia. Although there were no fresh fixtures of tramp-owned ships in this segment, market rate levels appear to be falling fast, according to one broker. The only charter transaction in this segment was a sublet by Hyundai Merchant Marine. The Korean operator reportedly chartered its 5,023TEU »Hyundai Platinum« out to X-Press Feeders at only 12,600$/day for very short period. Rates for wide-beam vessels are under greater pressure since they have to put up with increased competition from older, cheaper panamax vessels while the »fuel efficiency premium« they earn is being squeezed by the collapse in bunker prices.
In the panamax segment, trading opportunities continued to be relatively high, with a steady flow of fixtures week by week. Yet, activity was not strong enough to prevent some drastic losses as the month progressed. Charter rates were a bit more resilient during the first half of the month until they breached the 8,000$/day-mark on the way down, arriving at 6,500$/day in the latest round of fixtures of 4,250TEU ships in Asia. There is now an obvious disparity between the market sectors as panamax ships can be hired at lower rates than vessels of 1,700 to 3,500TEU.
Gearless 2,800TEU tonnage kept fixing at relatively steady levels but with a markedly weaker tendency towards the end of the month when more and more ships agreed new business at rates below 8,000$/day. The 2,824TEU »Patricia Schulte« reportedly fixed a 4–7 months period at 7,500–7,750$/day in Asia with CMA CGM which was probably the most active charterer in this size class last month. The more popular Aker type ships were still achieving better levels, as highlighted by the fixture of the 2,702TEU »Northern Vivacity« at 8,250$/day for 4–6 months in the intra-Asia trade to Hong Kong-based TS Lines.
The picture in the feeder segments remains a bit more positive, albeit varying from region to region. The geared 1,700TEU type suffered an 8.9% drop month-on-month in its average 12 month charter rate, according to the ConTex. However, by the end of October standard designs were still able to secure employment for shorter durations at rate levels in the high 7,000’s $/day (B170 types) or low 8,000’s $/day (Wenchong types). Maersk affiliate MCC reportedly signed up the 1,732TEU »RHL Aurora« and »RHL Audacia« for flexible medium periods at 8,250$/day.
The tone in the 1,000–1,200TEU segment was rather steady towards the end of October, with rates for CV1100 designs in Asia apparently bottoming out at 6,000$/day as prompt availability dwindled. In the Mediterranean, the same tonnage could fix over 1,000$ higher. Back in Asia, the more economic Daesun 1000 types saw market rates softening slightly from mid 8,000’s to low 8,000’s $/day. Worthy of note, the feeder ship market in North Europe has been trending firmer lately, with operators rushing to fix ice-class tonnage and owners successfully pushing for longer periods.
Feeder ship market holding up
Feeder operators are now even forced to consider multipurpose tonnage for short term capacity requirements, brokers said. OOCL declared an option at 9,000 €/day on an SSW type 1,000TEU vessel on the continent amidst expectations of further rises while the Sietas 168 L type »Akacia« (1,008 TEU) extended for 5–6 months with SeaCon at 8,000€/day.
As far as global cargo traffic and freight rates are concerned, latest developments have been pretty disappointing. Spot freight rates ex Far East dropped to extreme lows after the Golden Week national holiday in China while global throughput volumes have been stagnant, according to the RWI/ISL container handling index. The trade barometer eased from 117.3 to 117.2 points in September. The world’s largest carrier Maersk issued a profit warning, cutting back its earnings forecast from 2.2 bill. $ to 1.6 bill. $. G6 alliance member OOCL informed shareholders that its container liftings during the third quarter were up by 1.9% – but turnover was down more than 12 %.
Michael Hollmann
