The container ship market has seen a remarkable upturn. Now shipowners have to dig in their heels to hold on to the gains, writes Michael Hollmann
Following the rapid advance of container ship charter rates during March and April, the market is now lacking the necessary[ds_preview] momentum to scale further heights. In the largest gearless sectors, period fixtures have lately been stable but anxiousness is increasing as rumours abound of tonnage getting fixed at levels considerably below last done. Meanwhile in the panamax segment, shipowners are already on the backfoot, with major charterers succeeding in pushing rates for baby-panamax ships below 9,000 $/day.
By contrast, the sub-panamax sectors of 2,500-2800 TEU have managed to maintain rate levels at 10,000 $/day while rates for handy and feeder types below 2,000 TEU are finally catching up a bit.
The overall steadier tone in the market is illustrated by a relatively meagre 3.3% increase in the New ConTex that tracks trading in the 1,100-4,250 TEU sectors. By comparison, April saw an 17.0% and March an 11.5% rise.
Generally, global container trade looks in a much better shape compared with last year, as borne out by growth estimates of +10% for global traffic during the first quarter (CTS statistics) and of +5.2% in the all-important Far East/Europe headhaul trade (westbound). Container lines commissioned newbuildings and on top of that had to bring in considerably more charter tonnage to cater for cargo growth. In addition, they had to add further tonnage to bridge gaps in their vessel networks during the transition to the new alliances as per 1 April (Ocean, THE). The combined effect led to an impressive fall in the global idle container ship fleet to just 602,000 TEU – some 820,000 TEU less than at the beginning of the year.
The signs are, though, that the liner networks are nearly saturated with ships. Yes, peak season cargo demand may continue to build up. However, the recent stagnation in freight rates and large-scale failure of general rate increases in April and March suggests that charterers have to take a more measured approach to capacity planning in order to lift freight rates to more sustainable levels. Remember, the first quarter saw a number of major carriers posting net losses or even operating loss, and cost pressures are bound to increase – think of the firmer trend in crude and bunker fuel prices …
Lists of fixtures in the very large and large gearless sectors shortened quite a bit over the past weeks, although this could also be explained by reduced availability of tonnage after the recent fixing spree. On the other hand, prompt tonnage lists 1-2 months forward are lengthening, according to brokers, without sparking much forward fixing activity. Very large modern vessels still commanded very firm levels, with Hapag-Lloyd reportedly paying 33,000 $/day for the 2011-built 9,954 TEU »Athenian« in a 4-6 month period for transpacific trading. By contrast, latest fixtures for standard 6,000 TEU ships at 13,500 to 14,100 $/day showed a sideways movement or even slight decline on last done. The same can be said about wide-beam »panamax« units, with the 4,896 TEU »Hammonia Sapphire« achieving a steadyish 13,000 $/day for a 12 month period with Cosco in Asia.
Panamax back to reality?
In the panamax sector, charterers appear to have gained the upper hand again, forcing rates levels down from 10,000-10,500 $/day into the range from mid 8000`s to low 9,000’s $/day. Baby-panamax types were the first cave in, followed one or two weeks later by panamax-max types. However, certain positions still earn a considerable premium, like in the Atlantic where the supply of larger vessels is much tighter.
Looking further ahead, a common problem for post-panamax and for panamax tramp ships might be the cascading of very large and ultra-large liner ships from the Asia-Europe into other trades such as Far East/Middle East, transpacific or Asia/Mediterranean. Speaking at the Global Liner conference in Hamburg, Drewry analyst Neil Dekker warned that 68 vessels of 13,500-16,000 TEU may have to be redeployed outside Far East/Europe over the coming two years due to the influx of 18,000-21,000 TEU newbuildings. The knock-on effects could see many traditional post-panamax ships displaced out of their employments.
The sub-panamax classes of 3,500 TEU, gearless 2,700-2,800 TEU and geared 2,500 TEU gained further small improvements over the past weeks, with fixtures surpassing 10,000 $/day. Rate levels are expected to remain firm at least in the coming weeks.
Below 2,000, there have been some improvements for geared 1,700 TEU types both in Asia and the Mediterranean, with Wenchong 1700 types getting fixed at 7,500 $/day. Older B170 types finally enjoyed an uplift to mid 6,000’s $/day in Asia. Very modern efficient designs such as the Topaz and SPP 1700’s also obtained smaller increases, highlighted by the extension of the gearless 1,700 TEU »Nordlion« at 9,150 $/day for 8-10 months by Samudera and the fixture of the geared 1,756 TEU »Seamaster« at 9,250 $/day by Simatech.
Michael Hollmann
