Container lines look set to be sailing in 'choppy water'

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The prospect of new employment for smaller containerships with expiring charters is deteriorating at pace, with owners now facing the prospect of lengthy idle periods for their tonnage.

Moreover, open tonnage lists are being swelled by sub-lets, where long-term charterers of surplus vessels endeavour to mitigate some of the liability of their hire contracts by re-letting ships to third-party operators, usually at reduced daily rates.

Alphaliner reports that there are some 20 ships in the 1,500 to 1,900 teu segment, mainly in Asia, that will need fresh employment by the end of September, as the liner industry begins what one non-operating containership owner described as several quarters of “choppy water”.

The consultant said the overcapacity in the smaller sizes was “a concern, as it continues to undermine the segment”.

“Unsurprisingly, charter rates continue their descent,” reported Alphaliner, noting that a standard 1,700 teu ship can now command only around $11,500 a day – close to the vessel’s operating cost.

And even in the liner workhorse, panamax 4,000 to 5,300 teu, sector, rates are continuing to weaken to below $20,000 a day.

Recent fixtures there include the 2003-built 4,252 teu Alexander Bay, which Maersk has taken on a sub-let charter at $18,150 a day for nine to 12 months.

In the larger sizes, however, the charter market is more resilient. But Alphaliner said it expected daily hire rates for these ships to falter too, “due to the pressure exercised by the influx of newbuildings”.

The consultant said the overall trading environment “remains challenging” and added: “The market continues to be impacted by headwinds from both the cargo and supply sides.

“Only much higher cargo demand could fix the pain, but this is unlikely to happen any time soon, as inflation and higher interest rates continue to undermine consumers’ spending power around the globe.”

And it continued: “On the supply side, there is no relief to expect in the foreseeable future, with an influx of newbuild tonnage of all sizes hitting the market uninterruptedly.”

Meanwhile, Oslo-listed MPC Container Ships was the latest non-operating containership owner (NOO) to report a strong second quarter, producing a net profit of $102m from chartering its fleet of 65 vessels, ranging from 1,223 to 4,256 teu.

As with its peers, MPC has a strong backlog of contracted charter hire, in its case amounting to $1.2bn, and has coverage for 94% of the operating days of its fleet this year.

During the company’s Q2 earnings call this week, MPC CEO Constantin Baack said he had no concerns regarding the integrity of the the charter parties, arguing that, despite the collapse in liner profitability, most carriers would still have a good year.

“Our counterparties are still net cash,” he said.

Nevertheless, Mr Baack does see risks from the huge orderbook of 1.3m teu expected to be delivered before the end of this year, and 2.9m teu of new tonnage scheduled to arrive next year.

He said: “There is certainly a significant orderbook that will come into the market over the next 24 months that will lead to a certain shifting in trades, and I would think we will see a lot more choppy water next year.”