Worsening tonnage oversupply allows liner operators to obtain more hire reductions and flexible terms. Tramp owners faced with fewer number of major charterers as consolidation picks up.
As expected charter market rates for container vessels continued to recede due to further cumulation of idle tonnage and heightened[ds_preview] competition for any requirement circulated in the market. The good news from a tramp owners’ perspective is that more ships in the panamax and post-panamax sectors seem to be heading into cold lay-up while demolition sales of container vessels are finally going up.
Although these measures were not enough to stabilise the market yet, they are bound to have a positive impact and assist a faster recovery in rate levels during the next seasonal upswing in fixing activity. Overall, across the size classes from 1,100 to 4,250 TEU, average period rate levels as measured by the New ConTex slipped by 6.0% between mid-November and mid-December. This is only half the rate of decline which was served during the previous four week-period (-12.0%). However, given the fact that spot rates for large gearless vessels are now entrenched below operating cost levels, a slowdown had been widely expected.
Main areas of deterioration were again the panamax classes above 4,000 TEU and also the gearless and geared 3,500 TEU types. Although fixing volumes in the panamax segment don’t look too bad, with a couple of 4,000-5,000 TEU units securing extensions or other employment every week, the backlog of spot/prompt ships remains too high, preventing any positive rate movements so far.
By contrast, the 6,000$/day-barrier has been breached once and for all and a majority of transactions lately were reported at levels between 5,650$ and 5,850$ per day. At the time of writing, over 20 units with intakes of around 4,250 TEU were in search of new charter over the coming fortnight in Asia alone, one Hamburg broker estimated. Charterers are still not content, though, and sense that they can wrench further concessions from owners as regards terms and conditions.
This becomes obvious from the rapid increase of flexible period durations (2-6 months, 1-8 months etc.) and other flexible charterer-friendly arrangements, as another broker pointed out. As several sources stated, some major operators have even been successful in agreeing downward adjustments of rates on existing charter vessels when hiring another ship from the same owner. For example, an operator agree to fix a panamax ship at 6,000 $/day but only if the rate for another similar vessel fixed half a year ago – at say 12,500 $/day – gets slashed to the same spot rate for the final months of its charter.
Gearless 3,500 TEU ships suffered further significant drops as well, with latest fixtures reportedly concluded below 6,000 $/day and more in line with panamaxes. Rate levels had been a bit higher than for 4,250 TEU units for some time but a new lower benchmark was established with the reported fixture of the 3,534 TEU »Northern Diamond« at 5,650 $/day for 1-8 months by Maersk Line. »Given the lack of demand in this size and the amount of alternative ships currently spot, it comes as no surprise that an owner would consider such a deal. The alternative is likely to be a fairly long idling period,« commented one German broker.
Lower benchmarks
Pressure is also mounting on spot/prompt candidates in the 2,500-2,800 TEU sectors as tonnage availability climbs. In the gearless 2,700/2,800 TEU size class, the 7,000$-barrier could not even be maintained for the popular Baltic CS 2700 design as illustrated by the fixture in early December of the 2,742 TEU »Cape Mahon« at a reported 6,800 $/day by Wan Hai Lines in the east.
Geared 2,500 TEU types have to put up with similar levels for flexible period business following a further 6-9% erosion of their ConTex period assessments over the past months. Of note, OOCL managed to obtain an extension on three fuel-efficient units delivered from Jiangsu Newyangzi in 2013-14 to Norwegian owner Torvald Klaveness at $7,000-$7,500 per day for 1-6 months. Back in October two of the ships had still obtained 9,000 $/day with the same operator.. Even regions that are usually shorter on tonnage supply don’t offer much better rewards.
Michael Hollmann
