Momentum in charter market for global container shipping is picking up as prompt tonnage supply tightens. By Michael Hollmann
The cautious optimism in the container ship market starts to give way to a more euphoric mood as charter rates[ds_preview] begin to see larger month-on-month gains as high as a few thousand dollars in the largest sectors. The smaller sectors have seen significant improvements by hundreds of dollars, too, led by the geared 2,500TEU, 1,700TEU and by smaller feeder ship types operating in Europe, the Mediterranean and the Caribbean. Looking at the New ConTex which only covers the 1,100–4,250TEU classes, the monthly increase in rate levels accelerated to 6.6% which is twice as much as during the previous 4-week period. The Howe Robinson Containership Index which also tracks the larger vessel classes of 5,000–8,500TEU, was even up over 12% month-on-month by 21 March. Shipbrokers had predicted that rate levels in the traditional post-panamax segments above 5,500TEU were going to catch up. In fact the rallye in these classes turned out to be a major market driver over the past weeks. Looking back to the end of February, the benchmark fixture for 8,500TEU class ships at the time was the 6-month extension of the 8,533TEU »Lloyd Don Giovanni« with Cosco at 16,000$ per day for transpacific trading. Today, four weeks on, similar ships get fixed at 21,000$ as illustrated by the 8,814TEU »Northern Jasper« which joins Evergreen at this level for a 12 months period trading between the Far East and the West Coast of South America. A rise of 5,000$ within a month is almost reminiscent of the boom years in the early 2000’s. The much firmer trend also spilled over to the older 5,500–6,000TEU segment where spot earnings increased by more than 4,000$ when you compare the latest available fixtures with those at the end of February. The most recent transaction reported was the 12-month extension of the 6,008TEU »E. R. France« at 15,750$ with MSC for an India/Mediterranean service. With less than a handful tramp ships promptly available for new employment, further improvements are in the offing. Sure enough, shipowners will be trying to aim for rates in excess of 30,000$ or 20,000$ for the 5,500-7,500TEU class which would be need to cover both opex and capital costs for those vessels that were not purchased at distressed price levels. Capacity injections drive demand To some extent, the recent gains have allayed fears of looming oversupply in the largest charter ship classes due to growing deliveries of ultra-large vessels. 81 newbuildings in excess of 10,000TEU are expected to join the active fleet this year – almost a third more than in 2017. However, the indications so far are that liner operators still need all or most of the large charter vessels they can get to implement all the planned network upgrades. A number of new services are currently being set up including two Far East/West Coast South America, one transpacific, one transatlantic and one Asia-Europe loop. In total, more than 60 ships with an aggregate capacity of 360,000TEU are needed for these new services, in what Alphaliner predicts will lend another boost to the charter market. Meanwhile in the panamax and the handy/feeder classes below 4,000TEU, market rates have been progressing at varying speeds. In the 4,000–5,100TEU panamax class, fixing levels in the tonnage-starved Atlantic went up significantly to over 10,000$ for baby panamaxes and 12,000$ for maxi-panamax vessels, while in Asia the momentum has been lagging, with rates edging up slowly in the mid $9,000’s. 3,500TEU and gearless 2,800TEU ships finally succeeded in breaching the $10,000-barrier on the way up but the most spectacular rises could be observed in the geared 2,500TEU segment – a traditional workhorse of many intra-regional and north/south trades. Of note, Korean carrier KMTC in need of a ship with a limited length overall was forced to pay a top rate of 11,750$ plus ballast bonus for the 1998-built 2,456TEU »Buxhansa« with delivery in Busan. »Due to a number of uncovered requirements in this segment, rates are bound to increase further,« as one Hamburg broker pointed out. Modern gearless SDARI 2100 types (2,200TEU) were stealing a march on other vessels between 2,000 and 3,000TEU with new benchmark fixtures of 14,750$ to Maersk/MCC. This rate even exceeds levels fixed for modern wide-beam 4,600TEU ships, more than twice as big. Moving down to the sub-2,000TEU feeder classes, the 1,700TEU sector excelled with substantial rises that now see standard older Wenchong types securing fresh employment in all regions at rates above 10,000$ per day. Of note, even an older B170 type (»Charlie«) obtained over 10,000$ for six months Intra-Asia trading with Sinokor. But this is even dwarfed by the improvements for modern fuel-efficient 1,700TEU types (Topaz 1700, Wenchong II) which now get rate at well above 13,000$ per day. For the smallest feeder classes, the market in Europe and the Mediterranean offered the biggest rewards, with 1,000TEU ice class vessels securing employment at over 10,000$ per day for continent/Baltic trades. The Caribbean continued to be faced with tonnage shortages as well, enabling owners of high-reefer geared 1,300TEU ships to push rates up by around 1,000 to 10,000$ per day. The Asian feeder markets offer a more mixed picture, with market rates for geared 1,100 TEU ships inching up slightly to 7,600$ per day while the 700TEU class remains stuck in the low/mid $5,000’s in spite of there being basically no ships available.
Michael Hollmann
