News / Smaller feeder ships look doomed, caught in a 'Catch 22 scenario'

04/10/2023

The majority of the feeder fleet in Europe is more than 20 years old and, with a dearth of newbuild orders to shipyards in the past few years, the sector is facing a chronic shortage of tonnage.

According to an Alphaliner analysis, the age profile of the smallest feeder vessels, of up to 500 teu, is now 26 years, while the average age of ships of up to 700 teu is 22 and for those up to 999 teu in size it is 18 years.

“The continued disinterest by both Europe-based carriers and non-operating owners (NOOs) for this ship class raises the spectre of a gradual extinction of smaller feeder vessels in Europe,” said Alphaliner.

And the consultant said the very low number of orders for 1,000 teu-type vessels was “even more worrying”, given that the existing fleet of 160 vessels of 700-999 teu were “one of the pillars of the European feeder scene”.

“For years, smaller ships have been neglected by investors due to a combination of factors, including the collapse of the German KG system, a continued depressed charter market before the Covid bonanza and comparatively high newbuilding prices,” said Alphaliner.

Moreover, it added, the traditional providers of feeder tonnage, the NOOs, had been unable to underpin newbuild projects with long-term charter commitments from clients.

Indeed, one feeder operator contact told The Loadstar the potential tonnage crisis in the smallest containerships was a ‘Catch-22 situation’, in that “nobody wants to commit to a long-term charter, so no new ships get ordered”.

“The carriers can reduce volumes, or even rip up a feeder contract, so we can’t take the risk of chartering a ship for a long period and then have it sitting idle, due to a change of strategy or adjustments in a line’s network,” he said.

Alphaliner suggested that without an “unexpected change of heart” by carriers and NOOs, sub-1,000 teu ships would eventually become a rare sight in Europe – not least because of the increased climate-related regulatory environment which will persuade owners to scrap their elderly fleets.

The consultant sees the European feeder fleet being replaced by larger vessels, of 1,700 to 1,900 teu, which are currently deployed on intra-Asia routes and if reassigned to intra-European trades would require some element of volume consolidation and rationalisation of port calls.

Meanwhile, the lack of future supply from NOOs is obliging feeder operators to consider switching from their traditional chartering strategy to one of ownership. And some of the newbuild investments are for state-of-the-art future-protected feeder ships, designed to be powered by methanol.

However, given that the cost of bunkering methanol is estimated to be three or four times higher than for conventional fuels, feeder operators will need a greater contribution from their ocean carrier clients.

Unfortunately, according to a feeder operator contact, the request to carrier procurement officers for a ‘green’ surcharge for volumes transported on new methanol-powered ships has, so far, “fallen on deaf ears”.

“They like the idea of feedering on the new ships, but of course they don’t want to pay any more money for the service,” he bemoaned.