News / Cheaper rates for recent deals may point to charter market cooling

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Containership charter rates may be showing signs of cooling, based on recent fixtures.

Cosco has taken two 9,469 teu ships from Greek owner Costamare after the vessels completed a three-year hire with Zim, but is paying less than the Israeli carrier.

Yantian I and Shanghai have been fixed at confidential terms, and brokers said the charter agreement was inked in June 2024, as operators began forward-fixing to secure tonnage.

But the Chinese carrier is paying less than the $72,700 a day Zim contracted for each ship in 2022 when rates were higher amid the Covid-induced spike.

Meanwhile, Zim has renewed the charter of another Costamare ship, the 6,246 teu Zim America, at 27% less than the previous rate, $38,500 a day, compared with $53,000 in 2022.

However, demand for tonnage remains high, as operators chase market share, and large ships are scarce.

Drewry said in a recent report: “Containership charter rates have remained on a steady upwards trajectory this year and remain 200% higher than in 2019, despite slumping spot freight rates (see chart below), to which some carriers point as evidence that talk of overcapacity in the market is overblown.

“It is not uncommon for the two markets to veer in different directions for a period of time, but the containership charter market has broken records by experiencing a boom for most of the past five years.

“Freight rates are much more susceptible to changes in market dynamics, whereas charter rates can often lag freight rates due to multi-month, and even multi-year, fixtures that are set in contractual stone.”

The consultancy added: “With demand growth slowing, carrier profit margins being squeezed, a steady stream of newbuild deliveries and a potential return of Suez Canal transits, at some point the impetus to hire ships will unwind, and those long-term charter commitments by carriers will dissipate.”

Linerlytica said China’s new ‘Special Port Fees’ in response to the USTR levies on Chinese-operated and -built ships, could trigger further turmoil in the charter market, as ships owned by major lessors like Seaspan, SFL, Navios, Costamare and Global Ship Lease could all be covered by the 25% US ownership threshold set by China.