Market rates for charter container ships heading south in many segments due to holiday period and weak cargo volumes.
Boring«, »dull« and »quiet« are probably the most frequent words you hear when asking chartering professionals about the current market[ds_preview] environment in container ship chartering. As typical for the northern hemisphere holiday period, fixture volumes and rate levels have been receding with many decision-makers away to the beaches. The decline notably accelerated in early July and by 17 July the New ConTex, that tracks charter rate levels for ships from 1,100TEU to 4,250TEU, had shed 6.6% on a month-on-month basis. Although seasonal factors are considered to be the main factor, fundamental indicators also appear to have turned somewhat against shipowners. Cargo volumes on some key routes continue to lag expectations by far. According to UK-based Container Trade Statistics (CTS), TEU liftings in the headhaul Far East/Europe westbound trade fell by more than 3% in the first five months. Slot utilisation levels on this all-important route – as on many other routes – remain insufficient to bolster freight rates which continue to scrape along the bottom. Liner operators had some success with a number of general rate increases as per 1 July but their joy was only brief as nearly all gains were eroded within a few weeks, according to freight indices like the WCI (see Compass bar) or the Shanghai Containerised Freight Index (SCFI). The expectations are that many more carriers will dive into losses again when they announce their second quarter earnings. Hence there are growing concerns that liners will begin to prune back capacity and redeliver more charter vessels. »Given the poor level of freight rates, lines will once again be focusing on their costs and look set to temporise all but the most essential chartering needs,« a major British chartering broker warned.
Idle fleet statistics by French liner analyst Alphaliner suggest that the volume of unemployed container ship capacity (liner-controlled tonnage without service assignment + charter-free tramp vessels) went up from 228,400TEU to 342,900TEU between mid-June and mid-July. 86 tramp vessels were counted as idle while many more were approaching the end of their charters and about to run into spot positions.
Sub-panamaxes suffering the most
Period rate levels dropped most sharply for geared and gearless vessels with intakes of 2,500 to 2,800TEU in a continuation of last month’s trend. The ConTex rate assessments for these size classes were marked down by 3.8% to 6.8% depending on period durations. The situation has become tough especially in Asia where more and more spot vessels are piling up amid reduced chartering activity. The gearless 2,700TEU segment, which last month posted charter extensions at mid/high 12,000s $, meanwhile saw fixture levels in Asia edge down into a range between low 10,000s $ and mid/upper 11,000s $ for the most popular Aker CS 2700 designs. Market levels also came off in the Atlantic and the Mediterranean although charterers still have to offer premium rates to secure ships in these waters where tonnage availability is much lower than in the east. The geared 2,500TEU segment was hit even worse, with a handful of ships reportedly accepting four-digit rates beginning with a »9« amidst increased competition and fierce pressure from charterers. Apparently some charterers opted to waive their address commission only to be able to report fixtures below the 10,000$/day-barrier. However, these low levels should not be taken as market benchmarks given the fact that other vessels still achieve higher than 10,000$. Certain positions even attract rates above 11,000$ if there is a shortage of tonnage in the region as illustrated by the fixture of the geared 2,564TEU »Imara« at 11,300$ for 30–40 days by Korean operator KMTC.
Steady market for panamax
By contrast, the panamax and the post-panamax classes are showing a more steady performance despite the emergence of some post-panamax relets by liner operators. Fixing activity for post-panamax tonnage calmed down significantly and brokers only counted around a handful of representative tramp fixtures ranging from 20,000$/day for the more modern and efficient units to just 14,000$/day for older, less popular designs. »Stable to slightly softer,« commented one German broker. The same could be said about the wide-beam panamax segment which saw to more units fixing short periods of around three months at 19,000 and 20,500$/day, respectively. The figures look somewhat weaker than in other reported deals during the previous months, however they have to be adjusted for the shorter period durations in these cases.
Meanwhile panamaxes continue to show surprising resilience, with rates for panamax-max types of around 5,000–5,100 TEU steady at circa 15,500–16,000$ in Asia while the smaller baby-panamaxes (4,200/4,300TEU) keep commanding rates of 13,500$/day – some a bit more, some a bit less. Brokers consider the outlook as steady to firm as a number of requirements among liner operators have yet to be covered.
Geared 1,700 TEU under pressure
Geared feeder/handy types were not able to maintain their upward momentum and ConTex assessments for the geared 1,700TEU and the geared 1,100TEU type dropped by 2.6% and by 1.8% month-on-month basis 12 month periods. Spot positions in Asia were on the rise and one B170 type, »Joanna« (1,730TEU, geared, built 1999) reportedly agreed 10,450$ for a short flexible period with MCC in the Far East – down from previous levels of around mid $11,000s for this type. The summer slowdown has also dampened activity for the smallest feeders below 1,000TEU, although charter rates have not come off so far, according to brokers. In Northern Europe and the Mediterranean spot availability is still relatively low despite its recent increase. There is a good amount of short term requirements for dry-dock replacements etc., that may help open ships to cover the quite summer months, commented one German broker. A slightly firmer trend has even been observed for the smallest geared feeder ships in the Mediterranean. In Asia there has been some activity for 700TEU feeder ships at stable rate levels around 6,000$/day.m
Michael Hollmann
