2017 is bucking seasonal trends in that container ship charter rates trend up despite the summer holidays. By Michael Hollmann
The charter market maintained its momentum over the past weeks, with period rates for fully cellular tonnage continuing to firm[ds_preview] during August. The largest gearless vessels (in excess of 5,500TEU) began to lead the market up thanks to sustained demand which saw spot/prompt availability almost evaporate since July. Just recently, the firmer trend branched out into the panamax, handy and feeder type vessels, as illustrated by a more benign performance of the New ConTex. The market barometer for the 1,100-4,250TEU charter market sector made good some of the earlier losses and was up five points or 1.3% month-on-month by 17 August. Interestingly, it is the much-dismissed traditional panamax sector that posted the most significant improvements.
The main ingredients of the firming charter market are improved, broadened GDP and world trade growth (+4.0% in 2017, according to IMF forecast) and clearly accelerated container trade growth, with French market analyst Alphaliner recording a 6.7% rise in global container port throughput in the first six months. Against the background of a largely stagnating or contracting fleet in the classes below 4,000TEU, it was only a question of time until rising tonnage requirements by the container lines would begin to send hire rates for smaller vessels on a firmer path, too.
Demand for the largest available ships in the charter market has remained brisk although the sheer lack of available tonnage keeps limiting fixing volumes. According to Alphaliner’s latest spot fleet count, there was only one unit in the 7,500-11,000TEU sector seeking employment and two units in the 5,300-7,499TEU segment. The sporadic fixtures that emerge continue to get concluded at levels above last done, with the Korean-owned 8,533TEU »SM Charleston« – the former »E.R. Tianan« – reportedly agreeing 17,000$ per day for a 8-10 month employment with MSC in a trade yet to be announced. This compares with a benchmark rate of only 14,500$/day (concluded on the 8,586TEU »Gulf Bridge« by Maersk for 2-6 months) in our previous market wrap-up one month ago. The improvement for 5,500-6,500TEU class ships was perhaps even more notable. Fixing at just 9,500-10,000$/day a few weeks ago, levels have now surged past 13,000$ as evidenced by the 2005-built »Talassa« (5,527TEU) which reportedly obtained 13,900$/day for a 2-3 month employment with MSC in the Far East. A glance at the traditional post-panamax segment of our fixture list below shows that Geneva-based MSC has indeed been the most active charterer in this segment. Although the peak shipping season worldwide is bound to slow down as from October, market participants still see some upward potential in charter rates for the biggest ships over the near term. As Maersk Broker pointed out in a circular to principals: »There is very limited supply of tonnage for the next month within this segment and still a few operators looking for extra-loaders, so charter rates could possibly nudge [further) upwards.«
»Panamaxes« back in favour
The lack of very large units prompted more and more operators to shift to the panamax class as an alternative. There has been a burst of fixtures for traditional panamaxes which brought spot supply down a lot and rates back up. Fixtures now get done at 8,000$ and higher which represents an improvement of more than 1,000$ over the past four weeks. Even a few laid-up vessels got reactivated by owners and were absorbed without upsetting the firmer rate trend. Another factor that helped reduce charter tonnage availability was increased sale & purchase activity, including around eight ships that were picked up by operating owners, some of them probably for deployment in Chinese domestic trading.
Below 4,000TEU, it is mainly gearless 2,700/2,800TEU, 1,700TEU and smaller feeder units that are seeing a positive change in market direction. Looking at the gearless 2,700TEU sector, the market continues to show significant imbalances between the Atlantic and Asia, with the latter very hungry for tonnage and providing much higher rates. After a bit of hesitation over the past weeks, operators are now beginning to scan the market for forthcoming requirements again. A few ships meanwhile fixed repositioning trips from Europe to Asia to exploit the higher rate levels available there. A few short-to-medium periods got covered a very firm numbers in excess of 9,000$/day, with the 2006-built »Lorraine« (2,742TEU) achieving 9,600$/day in a 5-7 month extension with TS Lines while the 2,741TEU »Posen« agreed 9,450$/day – but on net basis (without address brokerage fees) – for 3-7 month period with Sinokor for intra-Asia trading.
The 1,500-1,800TEU sector proves to be busy as well. Some charterers are reportedly struggling to find suitable ships in the Far East, with all types of tonnage – from high-spec modern Bangkok-max via standard Wenchong to older flexible B170 types – seeing good demand. Some say it is surprising that charter rate levels have not pushed up faster based on supply/demand in the east. The fact is that rates are only gradually creeping up into the upper $7,000’s. Latest reported fixtures were those of the »Hansa Falkenburg« (1,740TEU, geared) at 7,650$/day for 50-150 days with Maersk-affiliated MCC and of the 2001-built »Gdynia Trader« (B170 type, 1,730TEU, geared) at 7,700$/day in a 2-4 month extension with Sea Consortium. Activity in the feeder classes of 1,200TEU and below has reportedly improved or remained stable in all major regions (Asia, Europe/Mediterranean, Caribbean). Tonnage supply is scarcest in Asia, both for 1,100TEU and 700TEU class ships, with rates for the latter slowly rising towards upper 4,000’s $/day levels. Demand for feeder vessels is reported to be improving in North Europe and the Mediterranean, too. Especially on the continent/North Europe, brokers see potential for rate increases after supply got cleared out and most ships in the gearless 1,000TEU class fixed for lengthier periods.
