News / HMM alone in search for charter hire cut as lessor Seaspan believes revenue is secure

© Vladimir Serebryanskiy

The world’s largest containership lessor says it has had no approaches from ocean carrier customers to renegotiate charter rates and is confident its contracted revenue of $6bn is secure.

Questioned during a Q4 and 2015 results teleconference, Seaspan Corporation chairman and chief executive Gerry Wang confirmed its business model, of long-term ship charters on a fixed daily hire rate to ‘blue chip’ container lines, was robust and offered long-term security to its banks.

“We have not received any renegotiation requests, nor do we expect any,” said Mr Wang, adding that Seaspan was confident that its customers would “continue to perform” to the terms of their charter parties.

Seaspan’s 2015 revenue was up 14% on the previous year, at $819m, and it recorded a net profit of $166m, up 19% on 2014.

The NYSE-listed firm operates more than 100 container vessels, with a capacity of nearly 750,000 teu, which are time-chartered out to carriers including Maersk, MSC, Coscon, CSCL, Hapag-Lloyd, Yang Ming and Hanjin, on periods of between five and 17 years.

The question arose following reports that troubled carrier HMM was seeking to cut daily hire rates by between 20% and 30% on its 30 chartered ships, and had threatened to seek the protection of the Korean courts if unsuccessful.

A source close to the situation told The Loadstar today that very little progress had been made by HMM in its London-based discussions with its lessors which don’t include Seaspan..

Mr Wang reiterated that Seaspan’s “number-one priority” when entering into a charter party with a container line was its “creditworthiness”, and he had no concerns about his company’s customer portfolio.

The average remaining term of its charters is six years, but Seaspan has 16 vessels, mainly panamax ships of 4,250 teu, on which charters expire this year, and the market for these ships is dire: even if a fixture can be found it will barely cover the operating costs of the vessels, let alone any outstanding mortgage interest.

Rival, but much smaller, containership lessor Global Ship Lease (GSL) recently sold its two late 90s-built panamax ships for a combined $9m, and was obliged to take a considerable write-down hit in its 2015 accounts.

In the case of GSL, all but two of its ships are chartered to minor shareholder CMA CGM, which has charter hire commitments for $450m to the shipowner.

Ships built in the 80s and 90s will be “going to the scrapyard in a hurry”, said Mr Wang, and added that environmental upgrades, such as for ballast water treatment which can cost $1m per ship, will hasten the rush to the breakers’ yard beaches.

Mr Wang said the current downturn cycle was “special”, in that it incorporated two significant restructuring changes in the industry: the takeover of NOL/APL by CMA CGM and the merger of the two Chinese state-owned carriers.

This would cause a shake-up of the current alliance structure, but would still see the strongest survive and thrive after the dust had settled, with the “good, profitable and the mediocre losing money”.