Posts Tagged ‘container ship’

Box Ship Charter Rates Fall in Peak Season

Monday, June 1st, 2009

Lease rates drift amid declining carrier demand for tonnage
London — Container ship charter rates are still falling despite the onset of the peak shipping season, as ocean carriers continue to trim capacity amid stagnant cargo volume on key deep-sea liner trade routes.

Pressure on rates has intensified after a group of leading German shipowners last week agreed to offer discounts for approximately 70 ships on charter to struggling Chilean ocean carrier CSAV.

The decline in rates has slowed, but there are no signs that the market is bottoming out as the number of idled ships has remained steady over the past month even as carriers reintroduce services that were suspended earlier in the year when freight rates hit all-time lows.

Charter rates have fallen below the record lows plumbed in the depth of the 2002 bear market. A 3,500-TEU gearless Panamax vessel is earning $6,500 a day, down 34 percent on the $9,500 it was commanding in February and nearly $20,000 adrift of average earnings of $26,125 in 2008, according to Clarkson, the leading London ship broker.

A 2,750-TEU ship is fetching $5,800 a day, compared with $7,000 in February and a 2008 average of $21,958, Clarkson reports. Smaller ships have taken an even bigger hit with a 1,700-TEU vessel on a one-year charter earning $4,613 a day, down from $6,179 at the beginning of the year and $17,285 in June 2008, according to the Hamburg Shipbrokers Association. The association’s ConTex index has fallen to 259 from 937 at the beginning of June 2008.

There are fears the $710 million refinancing of CSAV (which involves German shipowners cutting charter rates by as much as 35 percent for two years in return for a stake in the carrier) could prompt other struggling carriers to seek similar discounts.
Rejecting the CSAV rescue package would have threatened the carrier’s survival and resulted in around 80 ships being returned to the charter market to swell the pool of around 530 idled ships of 1.3 million TEUs looking for work.

Charter owners account for nearly 40 percent of the idled fleet, compared with around 25 percent two months ago, and their share is set to grow as carriers return ships as their hire deals expire and keep their owned vessels working.

While larger ships of more than 5,000 TEUs are returning to work as seasonal traffic picks up, a growing number of smaller vessels, typically owned by charter owners, are being idled. An estimated 400,000 TEUs of capacity will come off hire in the next two months, mostly smaller ships, which are unlikely to find employment.
But with charter rates now trailing freight rates, some ships are being priced back into service, particularly on intra-Asia trades.

Brokers fear the market faces a rout in September-October when cargo volume starts to fall just as carriers take delivery of an armada of ships of 8,000 TEUs and more ordered at the height of the boom two to three years ago. The surplus container ship capacity could reach 3 million TEUs in the final quarter of the year, according to the more bearish forecasts.

Contact Bruce Barnard at brucebarnard47@hotmail.com.

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