News / Bullish Zim goes long on new charters as it sets its sights on growth

02/09/2021

Israeli ocean carrier Zim has exercised its option for a further five newbuild 7,000 teu LNG dual-fuelled vessels, on 12-year charters, from containership owner Seaspan Corp.

The option was part of Zim’s July agreement to charter 10 vessels of the same class and design from the non-operating owner and commits the carrier to an additional minimum of $900m in hire costs.

Seaspan said it would pay approximately $530m for the construction of the ships and should start to make a profit on them just over halfway through the charter period.

Delivery of the original order of ten vessels is scheduled to begin in the final quarter of 2023, with the latest additions expected in the third and fourth quarters of 2024.

The charter of the 15 7,000 teu ships follows Zim’s agreement with Seaspan in February for the long-term charter of ten new 15,000 teu LNG-powered vessels, and its ‘orderbook’ of newbuilds on charter now stands at 25 ships, for 255,000 teu.

And with the launch of nine new services this year – including lucrative express sailings from Asia to the US west coast – Zim has grown its fleet from 68 ships to 105 in the past year, reaching a capacity of 424,000 teu and ranking it 11^th in the carrier league table, just below Wan Hai.

However, it is the most exposed of all its peers to the impact of sky-rocketing charter rates with all but one of its fleet chartered-in.

Zim posted a record net profit of $888m for the second quarter, from a 44% increase in its liftings and last week president and CEO Eli Glickman said he was “excited” about the outlook for container shipping and attributed Zim’s strong financial performance to its “proactive strategies” of “capitalising on attractive markets”.

Describing the current supply chain disruptions, blamed for driving the massive rise in freight rates, as “anarchy”, he suggested the “congestion issue” was “here to stay”.

And not only is Zim bullish on an extended run for the current highly profitable liner market, but it is setting its sights on inorganic growth by acquisition of smaller niche players, especially in the intra-Asia, Australasia and Latin America trades.

Meanwhile, Seaspan continues to cement its position as the largest non-operating containership owner, with a current fleet of 131 ships for a total capacity of 1.12m teu. In the past eight months it has ordered no less than 60 new vessels, for a capacity of 769,000 teu, all to go into long-term charters with major shipping lines.

On its latest transaction for Zim’s 7,000 teu vessels, Bing Chen, chairman, president and CEO, said there was “strong customer interest in this vessel size”, and added: “We consider this category to be the natural successor to the ageing fleet of conventional vessels between 4,000 and 9,000 teu.”