The rallye in container shipping showed no signs of easing in the past weeks. Scarce as it is, charter tonnage gets committed for ever longer periods far in advance. By Michael Hollmann
The familiar haggling about $ 50 freight more or less per TEU looks like a silly game of the past as the abnormal capacity and equipment sque[ds_preview]eze continues. Those who hoped that the situation can only improve were badly disappointed as the week-long blockage of the Suez Canal by the grounded »Ever Given« caused another escalation.
Vessel systems and equipment logistics in European trades got disrupted to such an extent, it will take container lines until the third quarter to restore their schedules, experts warn. Freight rates had just been sliding for a few months only to surge again from late March, with market sources reporting steep rises of 50 – 75 % also for contract freight rates that make up the lion’s share of liner business. Sure enough the first quarter was another pinnacle in liner profits.
In this regard, the ongoing voracious appetite for charter tonnage looks plausible despite growing concerns that the market could overheat. Charter rate levels measured by the New ConTex rose by almost 18 % during the past four weeks. If only half that momentum be maintained, then the previous all-time highs of the mid 2000’s will be in reach soon – something no one thought ever possible again.
Just as staggering as the rate increases is the rapid lengthening in periods, providing tramp owners with cover into the mid 2020’s in some cases. Three German-owned Northern »J« types (8,800 TEU) are reported to have secured four-year periods with MSC at almost $ 45,000 off forward positions. But it is not just the major global operators daring such long commitments. A geared 3,600 TEU ship (»Chopin«) even secured five-year cover at $ 20,000 with Spanish niche carrier Marguisa. The gearless 2,800 TEU segment sees standard durations increasing from two to three years while the smaller feeders have almost established two years as standard.
Recent fixtures include the extension of the »Nordleopard« (1,756 TEU) at mid $ 23,000’s for 24 months to CMA CGM and the 925 TEU »Contship Joy« at 11,500 $/day for three years (!) to Zim. With some many vessels disappearing for long periods, it is no surprise that prompt tonnage availability six months out is less than half what charterers were accustomed to on average over the past decade, according to London shipbroker Howe Robinson.
Almost everything that floats is put to use by liner operators as the peak shipping season is yet to come. Alphaliner reports that the (commercially) idle fleet has shrunk to 0.8 % of total worldwide capacity, down from 1.1 % four weeks earlier. Tramp ships immediately available for charter have remained absent for weeks.
Although both charterers and shipowners seem to be benefiting the same from today’s undersupply in fleet capacity, there is a risk that the game becomes too hot for some, warns Hamburg broker Toepfer Transport. Contrary to the major carriers, more and more smaller regional carriers begin to struggle at current charter rate levels because freights in their local trades are not as lucrative as on mainline routes. Not long until some smaller regional players may have to scale back or even wind down! Further consolidation could thus be around the corner. A threat for some, an opportunity for others … ?
