Against the odds: Peak season is coming, or is it? And do carriers care?
To peak or not to peak…
© Kok Keong Ng
By Mike Wackett
Idled global container capacity has reached a record high of 1.57m teu, according to the latest data from Alphaliner.
And one-third of the laid-up tonnage consists of unemployed containerships of 7,500-19,000 teu.
The 352 laid-up ships, as of 11 March, account for 7.8% of the global container vessel fleet – a number expected to grow with 1.25m teu of capacity scheduled for delivery this year.
After deductions for vessel scrapping, Alphaliner calculates that the newbuildings will add a full-year fleet growth of 4.3%. This compares with estimated demand growth of just 1.8%.
Continued weakness on the Asia-Europe, Asia-Latin America and Asia-West Africa trades has left container lines with a number of redundant ships.
Alphaliner noted that some 30 ships of 9,000-14,000 teu had become surplus following the axing of a series of Asia-North Europe loops by the four east-west alliance groups, with the latest network rationalisation announced by the CKYHE alliance this morning.
Owners have two lay-up options – hot or cold. In the case of the former, the vessel will wait at anchor but remain fully crewed and able to be redeployed almost immediately. Vessels in cold lay-up retain a skeleton crew and only run essential systems. These could take up to three months to reactivate, and still involves significant costs.
As a result, ocean carriers look first to see if they can cascade surplus ships onto other trades whilst also off-hiring any chartered smaller tonnage deployed on smaller routes as early as possible.
“Carriers are starting to shift their surplus ships out of these (weak) sectors, creating havoc on other trades,” said Alphaliner.
Meanwhile, continuing low bunker fuel costs have encouraged carriers to divert some ships around the Cape of Good Hope, instead of through the Suez and Panama canals, thus saving on canal transit tolls and absorbing around 100,000 teu of vessel capacity across 12 liner services, estimated Alphaliner.
Unsurprisingly, the overcapacity crisis has put further pressure on charter rates and obliged containership owners to instruct brokers to be flexible with terms and conditions, including offering free positioning.
And according to London-headquartered shipbroker Braemar ACM, few ocean carriers are prepared to put any firm periods on charters in sectors where there is an abundant choice of ships. It said that “flexi-period” terms, with only the daily hire fixed was now normal with most liner companies.
The charter market is experiencing “further misery”, said Alphaliner, and would “remain in the doldrums” as long as the supply-demand gap remained.
Meanwhile, recent fixtures reveal how far charter rates for larger vessels have plummeted.
Hapag-Lloyd was recorded fixing an 8,000 teu ship recently for two months trading between Asia and the west coast of South America at just $8,000 per day with flexible options.
While the overcapacity crisis in the larger sizes is continuing to drag down daily hire rates to new lows, the dearth of newbuilds in recent years of the feeder sizes has kept the sector relatively healthy, providing a silver lining for hard-pressed containership owners.
Hamburg Sud recently fixed a 1,100 teu ship for 16-18 months to deploy on its US west coast to South Pacific service at $9,600 per day.
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