By Mike Wackett
An acute shortage in the availability of charter tonnage could force carriers to shelve their plans to launch new liner services this summer. And a big hike in daily hire rates for container ships that do become available, combined with spiralling fuel prices, will force a rethink on the economics of the planned new and enhanced ventures. In particular, the hitherto workhorses of new service links, the classic panamax ships of 4,000-5,300 TEUs are “virtually sold out” according to the latest report from Alphaliner.
The consultant noted that just three panamax units remain ‘open’ for employment around the world after a flurry of charter activity in the past few months with a further three ships classified as unavailable due to technical or statutory reasons.
Unsurprisingly, hire rates for panamax vessels have soared to over $13,000 per day, which is in stark contrast to their sub-economic lows of 18 months ago of $4,000-$5,000, when around 100 ships of this size were fighting for employment. But, if and when panamax tonnage comes back onto the market those rates could skyrocket.
Indeed, one Hamburg broker told The Loadstar this week that he had cargo on his books prepared to pay up to $20,000 a day for a young 4,000 TEU ship. What is tough news for cargo is good news for shipowners that are now achieving rates that are at levels well above operating costs. With a typical operating expense of $7,000 per day for a panamax, healthy returns on investment are being achieved once again by owners in the sector. Consequently, asset values are spiking in this sector and according to a report from vesselsvalue.com, which said a typical five-year old panamax vessel has appreciated in value by around 40 per cent in the past year alone. Alphaliner said that only one panamax ship has been scrapped since November 2017, and this, along with shortages in other sizes, has all but killed off the box ship demolition market.
Carriers have long used the charter market as a ‘tool from their toolbox’ that they could turn off and on during peaks and troughs. In fact, top-five carriers MSC, CMA CGM and Cosco all charter-in more than 60 per cent of their operating fleet.
According to the weekly demolition report by Braemar ACM, just 15 vessels for a capacity of 27,500 TEUs have been sold for scrap so far this year, compared to 81 ships for 247,000 TEUs during the same period of 2017. Alphaliner’s idle tonnage list has shrunk to a new low of only 83 ships with a capacity of 224,243 TEUs, representing just 1 per cent of the global cellular fleet of 21.65 million TEUs. “The active fleet (total fleet minus idle capacity) currently stands at 21.43 million TEUs, representing a growth of 8.2 per cent compared to a year ago,” said Alphaliner.
The containership growth has been fuelled almost entirely from the top heavy delivery of newbuild ultra-large tonnage by carriers desperate to achieve the lowest unit costs in the market. Ironically, as vessels get bigger, the frequency of direct calls tends to reduce, requiring more feedering.
And given the current shortage in the smaller sizes, combined with the focus almost entirely on ordering ULCVs in the past few years, analysts are flagging up concerns of a looming shortage in feeder vessels. A recent report by SeaIntel predicted that in a worst case scenario there could be a shortage of 400 to 1,200 feeder vessels by 2020. Commenting on the data, SeaIntel Chief Executive Alan Murphy said: “It is clear that in the absence of any additional feeder vessel ordering, we will very likely see an increase in the premium for feeder tonnage – and this in turn will place further pressure on the pricing strategies for the carriers.”
Reprinted courtesy of The Loadstar (www.theloadstar.co.uk)