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Demand for charter container vessels may increase after final pieces of the liner shipping jigsaw are slotted into place. Enquiry for post-panamax tonnage trending up ahead of Panamal Canal upgrade.
The prolonged period of uncertainty seems over now. Since autumn last year, tonnage providers, brokers and shippers and the carriers[ds_preview] themselves were wondering what the competition in liner shipping would like after the latest round of mergers and acquisitions – chiefly the combination of the Chinese state carriers and the takeover of APL by CMA CGM.

The inevitable reshuffle culminated during the last weeks with the announcements of two major new consortia (Ocean Alliance, THE Alliance) beside the established »2M« of Maersk and MSC. As long as negotiations were dragging on, liner operators were not in the mood to charter in more vessels than absolutely necessary. »Recent uncertainty had a significant effect on charter market enquiry,« remarked one British chartering broker while a German broker complained that demand had been »almost paralysed« as long as the new partnership structures among charterers remained obscure.

Of course, the fundamentals of supply and demand in ocean container traffic have not shifted notably in a positive way, with large freight forwarders like Kuehne + Nagel or Panalpina assessing loaded box trade growth only at around 1% during the first quarter while figures from Container Trades Statistics (CTS) show a 2.8% increase to 35.7mill. TEU in global liftings during the same period.

Economic troubles across many emerging markets and sluggish growth in Europe continues to weigh down on trade growth. Even so, strategic factors related to liner industry consolidation played an additional in limiting tonnage demand over the past months, so brokers and owners are convinced that there is some backlog in charter requirements that need to be covered. So it is perhaps no coincidence that fixing volumes in the post-panamax tramp sector are reported to have gone up sharply during the past weeks – especially for vessels of 6,500–7,000TEU. »Although this has not yet translated into higher charter rates, spot/prompt availability has halved in this sector over the last few weeks, and this should eventually translate into improvements for owners,« commented London broker Howe Robinson.

Tonnage lists getting shorter

Increased fixing activity saw the number of very large tramp container ships (7,500–9,500TEU) that are seeking employment drop from eight to five units between end of April and mid-May, according to Alphaliner.

The post-panamax segment of 5,300–7,500TEU recorded a drop in spot tonnage from 46 to 39 vessels during the same period. Fixing levels in the very large sector ranged from 8,000 to 8,600$/day with some outliers, though. While Taiwan’s Yang Ming Line snapped up the 8,540 TEU »Seroja Tiga« for a 4–12 month period at just 7,000$/day, Japan’s Mitsui OSK was apparently forced to pay 8,850$/day in a more urgent case involving the 8,411TEU »Northern Juvenile« for short period, according to one report. The vessel was intended to substitute its sister »Northern Jasper« following its collision with the »Safmarine Meru« in Asia.

Meanwhile rates for 5,300–7,500TEU post-panamaxes were hovering between low and upper 6,000’s $/day, with the latest reported transaction being the 6,966 TEU »RDO Concert« fixed to Hapag-Lloyd at 6,500$/day for 45–180 days transpacific trading. MSC reportedly paid the same rate for the 6,539TEU »Puelo« whereas Maersk concluded a 2–10 month period on the 6,552TEU »HS Paris« at just 6,000$/day, according to brokers.

Capacity upgrades

Requirements for post-panamax tonnage are already driven by scheduled capacity upgrades of trans-Panama services that have so far been operated with traditional panamaxes. In fact this seems to be case for most panamax loops through the Panama Canal. The CKHYE alliance plans to discharge around 40 panamaxes of 4,000 to 5,100TEU as it replaces today’s services with a new set-up of five loops with 49 vessels of 6,500–9,500TEU through the enlarged Panama Canal, Hamburg’s Ernst Russ Shipbroker pointed out. The G6 alliance on its part is reported be launching one Far East/US East Coast string with neo-panamax vessels in excess of 10,000TEU. It is also said to upgrade one all-water service to post-panamax class while one Far East/US East Coast string is going to be continued with traditional panamaxes.

Market commentators are generally painting a very bleak picture for the panamax segment as the likelihood of charter ship redeliveries grows in the context of the Panama Canal expansion. Somewhat surprisingly, though, fixing activity for this vessel class actually picked up during the past weeks which in combination with further scrappings led to a decline both in the number of idle units (liner-controlled vessels + tramp units) and spot tramp-owned vessels.

Premiums for Atlantic delivery

According to Alphaliner, the spot list of panamax container ships shortened from 57 to 47 units within the space of two weeks. In Asia, baby panamax vessels (4,200–4,400TEU) continued to achieve levels around flat/very low 5,000’s $/day and maxi-panamaxes of 5,000–5,100TEU only a tad more. However, ships coming open or sitting in the Atlantic were able to secure modest premiums due to reduced tonnage availability as most spot units are concentrated in Asia. Hapag-Lloyd reportedly extended the 5,042TEU »Nansen Strait« at 6,100$/day for its North Europe/US Gulf service and it fixed the 5,029TEU »ALM Crystal« at 5,650$/day for 1–3 months transatlantic trading which was 400$ higher than what a sister vessel achieved in a fixture with Mitsui OSK in the east.

Imbalances hit smaller segments

Tonnage imbalances between the Atlantic and the Pacific also continue to characterize the smaller segments below 4,000TEU, with ships now regularly positioning from Asia to the Mediterranean and the Atlantic to benefit from the higher rate levels available there. Worryingly, charter demand in the very liquid 1,300-–1,800TEU midsize sector remains quite sluggish in Asia, with older B170 type units (geared, 1,700TEU) fetching last done levels of around 5,800 per day and rates for modern Wenchong 1700 types being assessed at around 7,000$/day amidst low activity. By comparison, in the Atlantic/Mediterranean modern geared 1,700TEU types were able to secure employment in the high 7,000’s $/day as last illustrated by the geared 1,740TEU »Hansa Limburg« in its contract extension at 7,750$/day for 6–9 months with Hapag-Lloyd

Michael Hollmann