Charter rates in the dry bulk and container ship segments are defying normal seasonal patterns. For many vessel classes the trend is showing straight up. By Michael Hollmann
Charter markets have become used to slowing activity and pressure on hire rates during the summer holidays. This year is[ds_preview] the exact opposite for most vessel types in the dry cargo and and also – albeit to a lesser extent – in the container ship market.
Charter rate barometers for container ships such as the Howe Robinson Containership Index and the New ConTex are still up month-on-month by mid-/late July. Instead of a typical summer dip, further increases are anticipated in the weeks to come based on limited spot/prompt supply of ships and strong supply for larger gearless ships.
The one constant feature throughout the first half of the year was brisk demand for traditional post-panamax ships, with market rates firming up rapidly during the second quarter. Enquiry from charterers has not waned much, but the pace of fixing slowed simply because there are hardly any tramp vessels available anymore. Since the middle of June, attention by operators has therefore shifted to traditional panamaxes.
Panamaxes in hot demand
According to brokers, this shift and the rapid increase in fixing of panamaxes took everyone by surprise. Spot availability reduced sharply as a result while fixing levels for 4,250 TEU baby panamaxes for 6-8 month durations have soared by more than 3,000 $ (+30-35%) within four weeks – »something we have rarely seen before,« as one broker remarked. Where ships were achieving 9,000-9,500 $/day one month ago, the latest benchmarks are now in the 12,500-13,000 $-range.
Hong Kong-based TS Lines was reported to have extended the 4,255 TEU »Harrier Hunter« for 8 months at 12,700 $/day, net of address commission. Allowing for a typical »add com« for the liner operator of 2.0% or higher, the total rate would breach $13,000. Elsewhere, Ocean Network Express was named as charterer of the 4,252 TEU »Holsatia« at 12,500 $/day for 7-9 months. Both are for delivery in the Far East in August.
The result of this rally in the east was that the rate imbalance between the Atlantic and Pacific has been turned around. Fixing levels for panamaxes in Asia are now almost 1,000 $ higher than for Europe/Mediterranean delivery, whereas before levels in the Atlantic used to be around $2,000 higher. Latest fixtures/extensions on the continent were reported at just below 12,000 $/day.
A number of factors seem to have converged to lend a boost to panamax demand, say brokers. First of all, overall cargo volumes has held up better than expected despite the US/China trade war and slowdown in GDP growth. Clarksons Platou forecasts a 3.4% increase in global loaded container traffic this year, versus just 2.9% fleet capacity growth. Some have pointed, in particular, to rising volumes in the Asia/North America trade as a driver for panamax demand.
No units left available
Secondly, panamaxes are benefiting from tightness in supply of bigger post-panamaxes. Those would probably be the first choice for charterers as they seek to maximise their economies of scale. However, since there are no units left available, panamaxes are next in line for them.
Fixtures of post-panamaxes have slowed down to just one per week or per fortnight as now and then some unexpected positions still come up, but only in the 5,500-6,500 TEU classes. Latest transactions showed improvements of at least around 500-1,000$ over last done, as illustrated by the 2002-built 6,400 TEU »Performance« at 21,500 $/day to OOCL. Cosco fixed the 2002-built »E. R. Sweden« (6,008 TEU) at 16,850 $/day for 9-11 months, while the modern wide-beam 6,881 TEU »Rhodos« is reported to have fetched even 24,250 $ / day for 12 months trading in a new Asia-US Gulf string.
The smaller vessel classes below 4,000 TEU are still lacking the same kind of momentum. However, the picture seems to have brightened up a little, especially for 3,000-3,500 TEU vessels, gearless 2,700/2,800 TEU and for 1,700 TEU vessels, all of them being in demand in Asia. Rate levels are mostly still in a sideways trend, though.
The fact that this rebound in demand comes during the holiday period, could be a precursor of a stronger rallye after the holidays, some say. Modest improvements could already recorded for modern Topaz 1700 (gearless 1,700 TEU) and for standard Wenchong 1700 types, with rate levels edging from 11,000 to 11,500 $/day and towards mid 8,000’s $/day, respectively. Some more activity also emerged from specialist reefer carriers. Dole reportedly fixed the 2008-built 2,797 TEU »Andino« (geared, 900 reefer plugs) for 2 months at upper $13,000’s in the Caribbean while Seatrade-affiliate Streamlines took the 2016-built 2,506 TEU »Nordserena« for 4-5 months at 13,500 $/day.
Michael Hollmann
