Zim's charter parties and the bunfight to come
…when freight rates go bananas
© Khunaspix Dreamstime.
By Mike Wackett
A significant spike in smaller container ship charter hire rates is bad news for ocean carriers and feeder operators in their incessant drive to reduce operating costs while freight rates across global tradelanes continue to decline.
Liner consultancy Alphaliner this week analysed the growing disconnect between bullish ship charter rates and bearish cargo freight rates and found that while average spot freight rates have plunged by 39% in the past year, daily hire charter rates for Panamax vessels for example have increased by almost 50%.
Indeed, according to its data, charter rates for smaller ship sizes have reached a new four-year high on the back of strong demand in regional trades, lower bunker prices, and a shortage of ships.
Despite cellular overcapacity plaguing the deep sea east-west trades as carriers have placed large numbers of orders ultra-large box ships for deployment on Asia-Europe and transpacific routes, there has been a dearth of orders in the smaller sectors in recent years.
Alphaliner’s idle containership fleet updates have generally shown week-on-week declines over the past year with the number of laid-up vessels reduced to around 100 as demand remains firm in the smaller sectors.
Notwithstanding the extra ships drafted in to service during the peak of the US West Coast port congestion crisis in the early weeks of the year, strong demand coming from intra-Asia has been the biggest influence on the charter market.
According to Alphaliner, the total capacity deployed on dedicated intra-Asia routes has surged by 23% compared to a year ago, with the trade absorbing around 166 extra ships equating to 390,000 additional slots.
Moreover, another 60 ships for 415,000 teu has been added to Middle East to Indian subcontinent routes in the past year giving the trade a 20% boost in capacity.
The booming demand on intra-Asian routes combined with cheaper fuel has been the driver of the growth and has been a key factor in the charter rate rally being enjoyed by containership owners.
Meanwhile, the boost in hire rates is reflected in the first quarter results of Athens-based non-operating containership owner Box Ships Inc. which saw its net income in the three-month period from its nine Panamax vessels increase to $1.5m from a $300,000 loss incurred in the same period of 2014.
Chairman, president and chief executive of the NYSE-listed company, Michael Bodouroglou, said the turnaround was the “result of the improved charter rates and lower vessel operating expenses”.
Box Ships charters its vessels out to ocean carriers and Mr Bodouroglou in his outlook said “there is increasingly room for optimism as we expect improved rates”.
Indeed, Box Ships has renewed its charter with CMA CGM for the 4,546 teu Box Emma, fixing the ship with the French carrier for a further year at $13,500 per day compared to the $9,450 per day paid during the previous charter period.
Box Ships also said that it was “currently in discussions” to charter the OOCL Hong Kong and OOCL China, both of 5,344 teu, following their redelivery by the carrier, “at what we anticipate will be profitable rates”.
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