»No point in repositioning for feeders«
All regional feeder markets are equally hit by the pandemic, says Sascha Juhasz, Head of Research at Ernst Russ Shipbroker[ds_preview]. Unemployed tonnage has stabilized, but a rate recovery will take time
What’s the picture across the regional feeder markets during the corona crisis? Which ship types are suffering more, which less?
Sascha Juhasz: All trades and size classes across the globe are affected as illustrated by a narrowing of charter rates between 5,000-8,000$/day for virtually all types of ships between 1,000 and 3,000TEU. In Europe and Asia, entire feeder loops got suspended or the number of ships reduced. In the Caribbean, vessel strings were maintained but downgraded in size, for example from 1,700 to 1,100TEU. Modern vessels with low consumption are particularly suffering at present due to the slump in bunker prices and reduced economic advantages versus older vessels. This is especially the case in Asia where usually popular 1,700 and 2,000-2,500TEU ships are stuck without employment.
What’s the outlook for the feeder markets if the global economic recovery will takes at least 2 years as forecast? When will markets turn a corner?
Juhasz: As far as operated tonnage is concerned, we see a bottoming-out already. The number of unemployed vessels of 500-2,000TEU has been steady at around 70 for the past 3-4 weeks. Charter rates will stay under pressure, though, as charterers are able to play owners off against one another. In any case, charter earnings will lag any recovery in trade and cargo volumes because it takes times to absorb all the overcapacity. Besides, with today’s extremely flexible periods of 1-12 months, many ships will have to carry on trading at the current low levels for a lot longer.
How can feeder tramp owners survive the crisis? Any solutions to alleviate the pressure?
Juhasz: Positioning into other regions might by relatively cheap due to low bunker costs but market conditions are almost equally bad all over. We will probably see more tonnage lay-ups soon which has been the exception so far. Also various owners should be granted loan moratoriums and bridging finance, if only because lenders have no other option. With market prices for 15-year old ships near scrap value, repossession and sale can just be the last resort for banks.
