The chance of another rate rally for charter container vessels after the summer has been getting slimmer as tonnage supply spirals higher.
Liner operators have turned the tables on tramp owners, forcing charter market rates for container ships down significantly in most[ds_preview] segments over the past weeks. While downward pressure was initially limited to the 2,500–2,800TEU segments, the rate erosion has since spread to post-panamax and panamax as well as to the geared classes below 2,000TEU.
According to the New ConTex, hire rate levels across the most liquid classes between 1,100 and 4,250TEU fell by more than 8% since this time last month. Since peaking in early June, the market has even come down by around 15%. Declines like this are not unusual as chartering activity generally tends to come off during the northern hemisphere summer holidays, with only the most urgent requirements still getting fixed in the absence of many decision-makers. However, the change in sentiment over the last couple of weeks looks quite profound as overcapacity issues on many container routes show no signs of relenting, with particularly Far East/Europe cargo volumes performing very poorly. The idle container ship fleet – including charter-free tramp ships and liner-controlled tonnage currently without service assignment – took a further step up by around 10% to 377,000TEU since our last issue of Hansa, based on the fortnightly idle ship count by Alphaliner.
Requirements for standard tonnage can basically be covered without much fuss in most regions right now, and market rates have been slipping by a few hundred dollars in some segments week after week. The good news is that charter rates are still around 33% higher than this time last year and that operators have largely refrained from speeding up services and making even more ships redundant in spite of a crash in bunker fuel prices over the past 12 months.
Despite a price drop of over 50%, fuel costs of liner services still exceed the charter cost element by quite some margin and hence rate premiums for the most modern and efficient eco vessels over standard vessels have only modestly fallen. According to London broker Howe Robinson, the differential between an »eco-type« Daesun 1,050TEU ship and a more common CV1100 still stands at 1,800$ per day in today’s market, compared with 2,150$ one year back. Meanwhile the rate gap between a 4,250TEU baby panamax and an eco 4,800TEU widebeam overpanamax remains at around 7,000$ per day. 12 months back it would have been around 9,000$, Howe Robinson explains.
Tough times for post-panamaxes
As usual the largest and most illiquid vessel segments have been suffering particularly hard under the recent demand volatility. Spot availabilty of post-panamax tramp ships is reported to have surged to around 15 units across Asia, sending rates down yet again by several thousand dollars.
Hong Kong-based OOCL reportedly snapped up the 2013-built 6,881TEU »Kea« at just 19,700 $ per day for a 40–80 days China-India round while Maersk extended the older, less efficient 6,750TEU »Northern Monument« for another 60 days for the Far East/Red Sea route at merely 17,900 $/day. 5,500TEU post-panamaxes equally struggle to secure employment, with the 5,576TEU »Great« agreeing a flexible 6–9 month period with Maersk at 14,750$/day on the India/Mediterranean route.
By contrast, panamax-class vessels have continued to perform more stable, illustrated by relatively modest losses of 3.6% and 4.3% on 12- and 24-month period rates since last month, according to the ConTex. Only ships caught out in spot positions have been forced to make notable concessions and accept rates in the 12,000’s$ to secure consecutive employment while those with later prompt positions were able to fix or extend business at steady levels. Although enquiry turned a bit more quiet again moving into August, several brokers voiced optimism that the panamax segment could maintain its balance over the coming weeks and months. Especially maxi-panamax tonnage of around 5,100TEU continues to see very encouraging signals, with one unit – the 5,047TEU »Atlantic Altair« – reportedly fixing a 4–7 month period with Japanese major NYK for October delivery at a firm 16,000$/day.
The renewed strength of the transpacific trades, particularly the Asia/US East Coast trade, is clearly benefiting the panamaxes as long as they still enjoy their competitive edge on the Panama canal route to the major consumption centres on the US East Coast and the mid-West of the US. Of note, box import volumes into the US have kept increasing as Xmas shopping seasons edges closer whereas the Asia/Europe trade suffered further precipitous falls in June.
Sub-panamax fortunes diverging
In the sub-panamax segments between 2,000 and 3,000TEU, the picture looks still quite bleak although at least for gearless 2,700/2,800TEU vessels the end of the recent rate slump looks near after the open tonnage list has been notably decimated by increased fixing volumes. Rate levels had subsided into the mid 9,000s$ with only the more popular Aker 2700 types still fetching above 10,000$.
By contrast, the geared 2,500TEU class has become even more exposed with an estimated 17 ships in spot or prompt position two weeks forward in Asia, Hamburg broker Martini Chartering advised its clients. Alphaliner assessed spot rate levels for the geared 2,500TEU type at low 9,000s$ in Asia and high 8,000s$ in the Atlantic for ships with standard specifications – down from 13,000–13,500$ per day back in early June. It explained that the ejection of many sub-panamaxes from West Africa loops and their replacement by panamax and post-panamax tonnage has led to a sustained build-up of spot tonnage which could not be absorbed by the launch of new intra-Asia services with ships in the same range.
After a prolonged period of stability, rates for geared 1,700TEU ships finally succumbed to the pressure as well. B170 and Wenchong types both saw levels drifting below 10,000$ into the mid 9,000s$ while one shallow-draft Hanjin 1600 type (»Star of Luck«) reportedly accepted a 6–8 month period with Sinokor at only 10,200$/day – more than 1,000$ less compared with previous fixtures of sister vessels, one broker pointed out.
Michael Hollmann
