Digitisation and a shift in buying power is putting pressure on shipping rates
The battle for a market that could amount to 30m teu globally is now between ...
A substantial spike in daily hire rates for post-panamax containerships will hurt ocean carriers with the highest percentage of chartered-in tonnage.
Moreover, the weaker carriers are finding themselves at the mercy of containership owners that are once again able to dictate terms, adding further pressure to their P&L accounts.
According to Greek containership owner Costamare, rates for six to 12–month charters on vessels larger than 6,800 teu have soared by more than 30% this year.
During its earnings call on Monday, Costamare, which operates a fleet of 71 containerships from 1,078 teu to 14,424 teu, said the larger vessels continued to benefit from strong fundamentals of “low supply and strong demand”.
“The number of idle ships has fallen across all vessel segments as liner companies launch new services,” explained chief financial officer Gregory Zikos.
Indeed, according to Alphaliner’s latest survey, the idle containership fleet has declined to only 108 vessels for 321,337 teu, representing just 1.4% of the global cellular fleet.
“Overall demand for tonnage is expected to remain high, and this should push down the size of the idle fleet further in the coming weeks,” said the consultant.
Specifically, in the VLCS sector of 7,500-11,000 teu, it added: “The availability of tonnage remains very limited, with zero vessels open ‘spot’ and only two ships of 8,000-8,500 teu coming open in the next four weeks.”
Evidencing the improvement in the charter market during the first quarter, Costamare said it had fixed or extended charters on 10 vessels in Q1, all commanding increased daily hire rates.
Notably, Costamare has fixed the 2017-built 11,010 teu Cape Tainaro with Zim for 10-12 months at a daily rate of $39,500, compared with the previous fixture at $28,250.
Evergreen, Costamare’s biggest client contributing 31% of its $2.2bn contracted revenue, has chartered the 2010-built 8,531 teu Navarina for a 12-month period with options at a daily rate of $21,900, versus the $17,400 rate of its previous fixture.
And even in the smaller sizes, Costamare has been able to push rates up significantly. Japanese carrier ONE has agreed to extend the charter of the 2001-built 5,576 teu Ensenada for a further six months at a rate of $14,250, which means the struggling merged line will have to find an extra $5,100 per day.
When charter rates spike it is the carriers with the highest percentage of chartered-in tonnage that are the most exposed. Maersk Line charters-in 43%, by capacity, of its 4.1m teu operating fleet, whereas number two–ranked MSC has some 69% of its 3.4m teu capacity on charter.
The highest exposed are Yang Ming, with 72% of its fleet by capacity on charter, and HMM ,which charters-in 71%. The lowest reliance on the charter market in the top ten container carriers is Hapag-Lloyd, which has just 38% of its 1.7m teu of capacity on time charters.
Interestingly, Costamare said it had installed scrubbers on three 9,403 teu and two 8,827 teu vessels on long-term charter to MSC, with the respective daily rates of $43,000 and $42,000 “increased” by an undisclosed amount and the charters all extended for a further three years.
Assuming that charter rates continue to climb on the fundamentals of tight supply and strong demand, containership owners can look forward to a win-win of increased asset values for their tonnage to go with the higher daily rates.
Elsewhere, the fast-expanding owner of 70 feeder ships, Oslo-headquartered MPC Container Ships, has secured a $40m three-year revolving credit facility, which its chief executive, Constantin Baack, said would give the company “additional financial strength…in anticipation of improved market conditions.”