Owners fear the worst as post-panamax charter market looks set to hit the rocks

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The cascading affect which has threatened panamax boxships over the past few years is now hitting those ships the new round of ultra-large container vessels (ULCVs) have directly displaced.

The owners of post-panamax 8,000teu-size vessels have come under severe pressure in recent weeks as charter rates have fallen precipitously.

Managing the redeployment of post-panamax ships that are being forced out of the trunk Asia-Europe trade by 10,000teu-plus vessels is crucial, and the timing can have a distinctly negative impact on both freight rates and daily charter hire prices.

Indeed, the cascading of unemployed 8,000teu vessels into other trades this year has been a disaster. According to Drewry, the dumping earlier this year of surplus post-panamax ships into the Asia-east coast South America tradelane “seriously backfired and painted them [the carriers] into a corner”.

Drewry noted at the time that, while year-on-year cargo growth from Asia to ECSA was running at 4.7%, the increase in vessel capacity deployed on the route between April and July was a massive 33.8%, leading to its conclusion that cargo growth was not the main driver in the ship upgrades.

Meanwhile, according to the latest report from Hamburg-based shipbroker Harper Petersen, charter hire rates on a typical 8,500teu size plunged by $4,000 in the first three weeks of November to $19,000 per day.

The scale of the decline is worrying, given that this rate is exactly half the $38,000 per day obtainable in May.

Over the longer time frame, the comparisons are even worse – today’s rate is an ocean away from May 2011 when the daily hire rate for an 8,500teu ship peaked at $50,000.

“The sector remains grim,” said Alphaliner, “with a build-up of ships and little or no demand.”

The analyst reported that the Costamare-controlled 8,530teu Navarino had just been fixed by China Shipping Container Lines for two months, with a third month option, for transpacific trading at a rate of just $18,000 per day, compared with over $30,000 at the same point last year.

And not only are the rates much lower, but as evidenced by this fixture, the terms and conditions are heavily weighted in favour of the charterer. It is almost certain that Costamare would not have agreed to such a short-term hire a year ago, while the cost of the positioning of the ship would previously have been borne by the charterer.

The problem appears to be specific to the post-panamax class, which suffers glaringly inadequate economies of scale compared with the ULCV class. Harper Petersen’s HARPEX Index for smaller vessels has been far more stable over the past year – for instance, 1,100teu feeder vessels are commanding $5,900 per day, broadly in line with that obtained a year ago.

Elsewhere, Clarkson Research Services noted in its third-quarter report that, despite the surge in ordering of 10,000teu-plus ships, there had been little recent investment in smaller ships, and the sub-3,000teu order book was at a historical low.

Against the backdrop of a shrinking sub-3,000teu fleet, the market for the smaller containerships is relatively positive; something that cannot be said for the embattled 8,000teu sector.