Surge in open tonnage weighs heavily on charter market. Hopes pinned on further boost in demolition sales
Although most will have crossed their fingers that the market simply cannot go down any further, rate levels and charter[ds_preview] terms & conditions continued to deteriorate during the last weeks. The New ConTex which tracks fixing levels in the 1,100-4,250 TEU sectors was down nearly another 2.0% month-on-month as this issue of HANSA goes to press.
A glimpse at our selection of fixtures below shows just how »relative« the term period has become. There are hardly any transactions left that don’t offer charterers maximum flexibility to render redelivery notices as they choose after »firm« minimum durations of only 1 or 3months. »5,000 $/day for 12 months and fully flexible, that’s what some major charterers keep pressing for,« as one German chartering manager complained.
While market rates for traditional panamaxes have already been stuck in the mid-to-low 4,000’s $ for some time with no positive trend in sight, it’s been the very large segment above 7,500 TEU, the 4,800 TEU wide beam units and to some extent also the higher-spec eco types in the 1,700 TEU midsize range that saw rates forced down in the last weeks.
The very large vessel segment reportedly suffered an influx of 10 spot units theat were returned by bankrupt Hanjin Shipping, sending the number of unemployed charter ships above 7,500TEU to more than a dozen. A couple of very large ships ejected by Hanjin were believed to have been fixed for short positioning voyages for empty equipment by Maersk Line, while the 8,411 TEU »Norther Jupiter« secured 6-12 months cover at a weak 8,500 $ per day with Hapag-Lloyd in Asia.
No doubt, the next few months are going to be extremely difficult for the largest open vessels as carriers tend to show little appetite for big tonnage during the winter low-season in the container trades. Latest cargo handling statistics suggest that 2016 may end up as another »year to forget« for liner operators, with TEU liftings in the Far East/Europe headhaul trade only up 1.4% in the first eight months of the year, while the eastbound transpacific route saw a 3.9% increase, according to UK-based Container Trades Statistics (CTS).
Of note, Intra-Asian trade volumes are reported to have grown by over 6% which appears to be at odds with the reality in the charter market. Chartering activity in Asia has been rather slow for a sustained period of time for popular ship types of 1,100 TEU, 1,700 TEU and 2,500 TEU, brokers said. Only 2,800 TEU types were seeing relatively good levels of enquiry and firm activity – even so market rates have remained very poor at around 6,000$/day.
Competition by smaller and larger vessels for the same requirements keep undermining efforts by owners to lift rates. A total of six orders by Maersk Line and Hyundai Merchant Marine (HMM) for gearless 2,800 TEU ships ended up getting covered by gearless 2,500 TEU and 3,500 TEU units around the middle of October. All these vessels had been returned to the market by Hanjin, brokers said, and there are more coming up.
French analyst Alphaliner warned that 23 of the Korean carrier’s 97 operated vessels are still waiting to be redelivered. The influx of Hanjin tonnage into the spot market or their detention by creditors already sparked a major surge in global idle container ship capacity (charter-free tramp and liner vessels without service assignment) to 1.33 mill. TEU (6.5% of total fleet capacity worldwide) as per beginning of October.
Normal cyclicality in world fleet utilization suggests that the idle fleet will continue to swell during the coming months. Its growth may be moderated by higher demolition activity, though, with ships as young as 7 years reportedly being offered to cash buyers and shipbreakers.
Scrap sales are further encouraged by the recovery in prices to well over 300 $/ldt on the sub-continent. Meanwhile some researchers and analysts have raised their demolition forecast to 600,000 to 650,000 TEU for the full year which would set a new shipbreaking record in the container sector.
Frustratingly for shipowners, even higher spec vessels and niche classes like the much-celebrated wide beam types have been dragged deeper into the doldrums as well. Modern wide beam 4,800 TEU vessels are now forced to fix at levels close to or below OPEX as well, with the fixture of the »Hammonia Virginia« at 6,500$ already undercut by the »HS Shackleton« at 6,250 $/day to Hapag-Lloyd, brokers reported.
Meanwhile, in the 1,700 TEU sector, the most popular eco/Bangkok-max designs (SPP 1700, Topaz) saw rate levels slip from mid to lower 8,000’s per day, though owners may hope that the recent rise in bunker prices will prompt charterers to increase the premiums for these more economical designs.
The gearless 1,730 TEU »Nordlilly« reported fixed a 2-5 month charter with Korean carrier KMTC at 8,250 $/day while the geared »Seamaster« (SPP 1700) apparently obtained 8,375$/day from Orient Express Lines in the Middle East.
