Container ship owners unable to preserve earlier gains. Demand returns for biggest ships after downward correction. By Michael Hollmann
The spring rally in the container ship charter market is fading into memory as the weaker trend, that emerged at[ds_preview] the start of May, turned into an avalanche for the biggest gearless vessels down to panamax class during June. The vessel segments covered by the New Contex (1,100–4,250TEU) suffered a fall in average period rates of almost 5% over the past month whereas in our last issue of HANSA we could still report a circa 3% improvement month-on-month. The drop in the compound index was contained by the relative stability in market rates for gearless 2,700/2,800TEU vessels, geared 1,700TEU and geared 1,100TEU ships all of which were able to limit losses to less than 3.0%. As always, the greatest volatility is in the larger vessel classes due to more limited charter trading liquidity. Both 24-month and 12-month period rates for 4,250TEU baby panamax vessels were marked down by a whopping 15.0-16.0% by the ConTex panel, as charter redeliveries began to outpace fresh fixing activity. However, the sharpest losses were seen in the very large size class of 7,500 to 10,000TEU. Fixing levels for standard 8,500TEU class ships nosedived by around 40% to just 10,000$/day in early June before rebounding a bit. Apparently the steep downward correction in rate levels sparked fresh appetite among charterers. How can you withstand the temptation if charter tonnage comes so much cheaper that owned vessels at full capital costs? »The bottom is behind us now and currently business gets concluded at around 12,000$/day or even more if it’s for shorter period,« commented one Hamburg chartering broker. Only backhaul trips from regions like the Mediterranean with a lack of export cargo got covered at levels below $10,000 (»Adamastos«), while the »Northern Jupiter« (8,400TEU) achieved 12,000$/day, the »Athos« (9,954TEU) 15,000$/day for a round voyage and the 10,114TEU »Express Berlin« 15,000$/day for a medium period. According to the latest idle and spot vessel count by Alphaliner, effective availability in the 7,500 – 10,000TEU sector has diminished to just one unit. This may even suggest some further potential for recovery. However, there is more tonnage looming in the background that could be activated perhaps within a couple of weeks. This includes five vessels formerly operated by now-defunct Hanjin plus four other idle units in the same size range. On top of that, a number of completed newbuildings are waiting to be delivered and commissioned at Asian shipyards.
Large gearless vessels (traditional post-panamaxes) of 5,500 to 7,500TEU have been dragged into the downward spiral, too, with rates for 6,000–6,500TEU class ships dropping from circa 14,000$/day to 11,000–12,000$/day since our last report.
Panamax rates slipping faster
Traditional panamax vessels are also among those that are taking the brunt of the market’s fall, with spot/prompt tonnage availability for 4,250TEU baby panamaxes in Asia up by over 80% to 27 units compared with end of April (15 units). Maersk, which accounts for the vast majority of recent fixtures, pushed hire rates down to low $ 7,000’s for smaller panamaxes, against peak rates of 10,000$/day in April. The next weeks will remaining tough, »unless the market sees more requirements, it will be difficult for owners to hold these rate levels,« one broker warned.
Below 4,000TEU, the market looks more favourable from the owners’ perspective, with just a slightly weaker trend for the majority of size classes and types. Of note, gearless 2,700/2,800TEU ships kept holding their ground pretty well as owners were still obtaining rates in excess of 9,000$/day. Tonnage availability has crept up, though, and there could be more competition from unemployed cheaper panamaxes in trades where upgrades from 2,800 to 4,250TEU could make sense from an operational and commercial perspective. Geared 2,500TEU ships came under greater rate pressure as the supply/demand balance shifted a bit more into charterers’ favour, with fixing levels in Asia down to mid/low 8,000’s $/day, according to brokers. There is quite a spread in rates between the regions, though, as charterers still had to pay over 9,000$/day for geared 2,500TEU’s in the Med and even over 10,000$/day for one vessel trading on the Pacific coasts of North and Central America.
Demand for feeder tonnage <2,000TEU has been lacklustre of late although rates remain fairly stable, again with notable variations for specific types. Standard geared 1,700TEU vessels like the popular Wenchong type were lately fixing at circa 7,000$/day in Asia, while the Caribbean offered 8,000$. Geared 1,000–1,200TEU ships in Asia achieved between mid/upper $5,000’s (CV1100) and low $7,000’s for designs that offer greater intake at 14t hom. load. Demand in North Europe perked up again following the formation of the new alliances, with gearless 1,000TEUs benefiting the most as rates firmed up to 6,800–6,900€ for medium to longer periods.
With the onset of the summer holidays and charterers probably covered to a large extent for the cargo peak season, tramp owners must brace for more pressure during the coming weeks, brokers say. However, strong throughput figures and economic data from Europe and the US raise hopes of ongoing brisk trading activity and high utilisation of liner fleets over the coming weeks and months.
Michael Hollmann
