Smaller feeder ships look doomed, caught in a 'Catch 22 scenario'
The majority of the feeder fleet in Europe is more than 20 years old and, ...
Charterers are prepared to break the bank to fix container feeder tonnage and, according to one shipowner, the market could remain highly elevated for several years.
“We are witnessing an historically strong charter market, with rates at record high levels, while charter periods are getting longer and longer,” said Constantin Baack, CEO of Oslo-listed feedership owner MPC Container Ships (MPCC).
He highlighted a recent fixture for one of its 2,800 teu vessels done with charterers at $31,000 a day for a three-year period, representing an increase of over 300% on the market of a year ago.
Moreover, the red-hot charter market is giving rise to some shorter-term fixtures at eye-watering rates.
Mr Baack said it had recently concluded a charter with a feeder ship for 65-80 days, prior to it entering dry-dock, at “an unbelievable hire rate of above $100,000” per day.
He was speaking during an investor call yesterday to elaborate on the company’s strategy in the $210m acquisition of Songa Container and its fleet of 11 ships of between 1,000-4,000 teu, funded by a mixture of debt and new shares issued.
“Based on the existing charters and assuming renewals at current market rates, the newly acquired fleet is positioned to generate ebitda for 2022 and 2023 of $75m and $90m respectively,” said the company.
MPCC bases its bullish earnings forecast for the new fleet arrivals on the lack of vessels becoming open in the next two years, due to the length of the fixtures that have been concluded.
And the short supply situation is likely to continue for much longer in the feeder sector due to the historical and current lack of investment in ordering replacement tonnage.
Although there has been a rush of newbuild orders from carriers that are awash with cash due to skyrocketing freight rates, these are almost entirely in the larger sizes, heavily weighted towards tonnage in excess of 12,000 teu, with just 9% of teu currently on order in the 1,000-3,000 teu feeder sizes.
“MPCC’s core segments are still lacking sufficient newbuild orders to cope with demand for that size cluster in the growing intra-regional market, which suggests favourable mid-term market dynamics,” said the shipowner.
The company, formed in 2017 and, with the inclusion of the Songa fleet, now operating 75 ships for a capacity of 158,000 teu, will continue to target possible new acquisitions, according to Mr Baack, “as long as they are a good fit”.
MPCC is taking advantage of a charter market that is significantly outpacing the asset value of the ships.
The lag in asset values explains the aggressive stance of carriers such as MSC and CMA CGM to hoover up any tonnage that becomes available. And in paying top dollar for tonnage the carriers are also endeavouring to insulate themselves from the charter market which, one broker told The Loadstar this week, was “totally out of control”.
The container lines are, however, gambling that they will be able to hold freight rates at high levels to pay for their vastly increased operating costs.