News / Panamax vessel crisis deepens as Rickmers Maritime Trust suspends share trading

Classic panamax containerships continue to be pulled from services transiting the Panama Canal, resulting in a record number of prematurely scrapped vessels – many sold at a significant loss to owners.

According to Alphaliner, since the opening of the new canal locks in June, 120 panamax ships of between 4,000 and 5,300 teu have been displaced by larger tonnage, with another 30-40 expected to be removed over the next few months.

The impact on the charter market for the sector has been disastrous: daily hire rates for panamax ships have slumped to below $5,000 per day, a rate that does not even cover operating costs and compares with the $15,000 achievable at the beginning of last year.

Moreover, brokers are obliged to agree “very flexible” hire periods and options, together with short redelivery notices and extended positioning and redelivery ranges.

For example, one broker reported that CMA CGM-owned ANL recently fixed the 4,253 teu Seaspan Loncomilla (previously on charter to CSAV) for 2-12 months at $4,250 per day for the Asia-Australasia trade.

Owners that cannot find a charter and are prepared to wait for an elusive recovery idle their vessels in hot or cold lay-up, joining another 90 panamax ships in the same state.

However, many owners, faced with idling, maintenance, survey costs, mortgage interest payments… and with no revenue potential as well as a dearth of buyers in the secondhand market, have been obliged to consign their ships to the Indian sub-continent and Chinese breakers’ yards, selling at distressed levels.

So far this year around 40 panamax containerships have been sold for demolition, together with some 25 post-panamax units, of 4,600-6,500 teu, the youngest of which was less than 10-years-old.

The effect of this acceleration in scrapping – also prevalent to a lesser extent in other vessel sizes – has been to significantly lower the value and life cycle of containerships.

According to Drewry Maritime Research, the average age of a containership being scrapped in 2010 was 30 years, today it is 19.

Drewry notes that container vessels have hitherto depreciated in value over a period of 25 years – so a ship scrapped before its 10^th birthday could mean a massive 60% accounting write-off.

Several non-operating owners have been obliged to take substantial impairment losses on their panamax ships, but for Singapore-listed Rickmers Maritime Trust (RMT), which only has panamax vessels in its 16-ship fleet, the dire employment prospects for the sector have been especially rough.

RMT has five ships on time charter to MOL until 2018/19, six are seeking spot employment and the remaining five are in cold lay-up in Malaysia.

In a statement issued yesterday by the RMT board, signed by chairman Bertram Rickmers, the company said it was “unable to pay the interest payment of $4.26m” due on 15 November on a $100m bond.

It said it was “unable to demonstrate that it is able to continue as a going concern” and was therefore suspending its shares “until the issue has been resolved”.