News / As deepsea rates dive, carriers hunt for intra-Europe shortsea returns

Photo: VesselFinder

With the major deepsea trades in the doldrums, container lines are looking more closely at niche shortsea markets to support their growth aspirations.

European shortsea services, such as Ellerman City Liners’ North Europe to Iberia routes and WEC Lines’ new Euro-Maroc service, which launches this month, are not only confirmation of demand, but also that sustainable freight rates can be achieved on intra-Europe routes.

And as ocean carriers idle their huge newbuild deliveries, due to poor demand prospects on the Asia-Europe and transpacific trades, many secondary and small routes continue to thrive, creating demand for smaller tonnage.

Moreover, feeder operators, no longer hobbled by owners’ demands for lengthy time-charter periods and sky-high daily hire rates, are now able to pitch again for short-term contracts and ad hoc shipments.

Vessel brokers report a “healthy appetite” in the smaller-sized containership sectors, as owners become more realistic about charter rates and periods.

“There is a lot of pent-up demand for tonnage in the smaller sectors and, now that owners have become more reasonable with their terms and conditions, we look forward to a rush of fixtures in the coming weeks,” one broker told The Loadstar.

“Although daily hire rates are lower than for previous fixtures, and the conditions are no longer heavily weighted in favour of the owners, they are still achieving rates considerably above operating costs, and many of them no longer have mortgages attached so there are often no finance costs to cover either,” the broker explained.

Meanwhile, Maersk Broker said the bulk of the activity in the charter market over the past week had “consisted of extensions of feeder vessels for short periods in both the Atlantic and Asia”.

It added: “We saw an uptick in activity for the feeders below 2,000 teu, with several fixtures emerging throughout the week. The demand is split evenly between the Atlantic and the Far East; however, as supply is much greater east of Suez, terms are still more favourable in the Atlantic region.”

Elsewhere, London-based broker Braemar reported “multiple units” in the feeder segment being extended and fixed for new employment in the past week, “regardless of the sector being impacted by lower time-charter rates”.

It also noted that Maersk and CMA CGM were behind “securing two modern 1,800 teu newbuildings for short and flexible periods of up to six months at similar terms”; evidence that carriers’ are now making good use of the more flexible charter market to cover their commitments and, in some cases, test new markets.

The low orderbook for smaller ships – some 90% of the capacity of newbuild deliveries being ships of 12,000 teu or above – suggests oversupply will not be an issue in the smaller sizes.

In fact, with demand for intra-regional services remaining healthy, and new environmental regulations curbing service speeds of ships and therefore reducing supply, it remains a good time to be a small-containership owner.