News / Demand for smaller ships boosts charter market while ULCVs sit at anchor

Photo: VesselFinder

The number of newbuild ultra-large container vessels (ULCVs) temporarily idled off the Chinese coast is growing with Asia-Europe carriers forced to halt plans to cascade incumbent ships to other trades.

Alliance partners are reportedly experiencing considerable resistance from partners to the phasing in of the 24,000 teu behemoths – stemmed to displace average 18,000 teu ships – not least because of the added pressure to fill the pooled slots against a backdrop of falling demand.

And the oversupply position is set to get much worse with another 150,000 teu set to be received this month, the vast majority of which are vessels over 10,000 teu.

This follows nearly 700,000 teu of newbuild capacity that has hit the water since June.

However, despite the chronic oversupply of larger vessels, the containership charter market is proving surprisingly resilient due to the industry focus on only ordering big ships.

Although daily hire rates for the smaller sectors have lost some ground in recent months, they remain well above pre-pandemic levels.

For example, the current average rate for a classic 4,000 teu panamax is around $20,000 per day, which compares with the 2019 average of just $13,000, and all-time lows of $5,000 per day.

While their ultra-large fleets struggle to achieve the high utilisation levels needed for profitable voyages, the same carriers continue to tap the charter market for smaller tonnage to cover inter-regional or niche trades.

A broker contact told The Loadstar that although overall activity levels in the containership charter market were “still quiet” from the impact of the holiday season there were signs that operators were now coming back into the market.

“We’ve had quite a bit of interest in the past week or so and it seems that carriers have not lost their appetite for chartering small ships,” said the broker.

“What has helped massively is that owners are now being more realistic about time periods and terms,” he added.

A year ago owners were demanding minimum two-year charters, but now the flexibility of shorter periods, essential for a vibrant charter market, is back.

This has been welcomed by feeder operators such as Unifeeder and X-Press, which rely on the charter market for their tonnage, but require flexibility in charter periods.

A feeder operator contact told The Loadstar recently that he was “relieved” to see that flexibility back in the charter market.

“It was almost impossible to get a charter under 12 months a year ago, but now we are back to being able to quickly adapt to the ebb and flow of demand in the market,” he said.

Meanwhile, CMA CGM remains one of the most active carriers in the charter market, and recently took charge of the 1,208 teu, 2001-built Yigitcan A in North Asia for a period of 4-6 months at $11,900 per day.

Elsewhere, Maersk is taking delivery in the western Mediterranean of the 1,756 teu, 2014-built Josita B for a period of 6-8 months at $14,000 per day.