Charter market provides a welcome boost for owners of smaller containerships
Source : Loadtstar
Owners of smaller containerships, with limited exposure to the volatile deepsea east-west trades, are enjoying increases in daily hire rates and enquiries for time extensions.
According to the latest Alphaliner report. the container charter market is “evolving in a split way”, with vessels of 3,000 teu and under “enjoying brisk demand with an improving outlook”.
It says: “Smaller ships of 1,000-3,000 teu, which focus on regional or feeder routes have been enjoying improving conditions, with steadily rising demand, a falling supply and slowly improving charter rates.”
According the HARPEX Index, hire rates for a 1,100 teu ship increased to $6,350 per day as of 1 October, from $5,600 on 1 August. And for a 1,700 teu vessel, there was a market increase to $7,450 from $6,700, over the same period.
In contrast an 8,500 teu vessel had seen a $500 a day erosion in hire rates over the past four weeks, to $17,250 per day.
The larger ships are suffering from an earlier-than-expected start to the slack season, just ahead of the Chinese Golden Week holidays this month, and continuing deliveries of new ultra-large container vessels (ULCVs).
In order to accommodate these new ULCVs, mainly being sent to the Asia-Europe trade, carriers are obliged to cascade incumbent ships into smaller trades and are off-hiring as much chartered-in tonnage as possible deployed on those services.
And even if charters have still some months to run, options for extensions are not being taken up by carriers.
One London broker told The Loadstar today he was “very worried” about the prospects for the bigger ships going into 2018.
“We are just not getting any interest at the moment,” he said.
Currently, hire rates in the larger sectors are insulated by the relatively low availability of spot business, but this could change significantly as and when more ships are off-hired. Shipowners with time charters expiring on bigger ships will be exposed to the spot market rates which are significantly down on previous years.
For example, non-operating containership owner Global Ship Lease, 44% owned by CMA CGM, has a trio of 8,063 teu ships on hire to OOCL, all with charters expiring over the next 12 months.
When the vessels were acquired in a sale-and-lease-back deal from the Hong Kong carrier in 2014 and 2015 the charter rate was fixed at $34,500 per day – the market for them is now at around half of that.
Meanwhile, given the shortage of the smaller sizes, caused by an orderbook focus on big ships in the past few years, their owners will continue to enjoy improved returns.
Indeed, this is exactly the business model of Oslo-listed MPC Container Ships, which has invested some $144m in acquiring 20 feeder vessels, with a mix of self-sustaining and gearless, ranging in size from 966 teu to 2,824 teu.