From Mike Wackett (The Loadstar) –
There are now clear signs that the weak demand for sea freight is beginning to affect the hitherto isolated container ship charter market.
While daily charter rates for larger charter vessels remain stable, mainly due to the lack of tonnage from charters, brokers are reporting that feeder vessels are seeing an increase in open tonnage, resulting in downward pressure on charter rates for smaller vessels.
During the peak in demand last year, shipping companies of shipping companies were on the way to long-term charter contracts, and owner brokers also succeeded this year in acquiring charter contracts with a term of more than two years for the larger ship sizes.
Fearing that they would not be able to cope with peak season demand, transport companies were prepared to accommodate owners’ demands for long rental periods.
However, as the prospects for a good peak season quickly fade this year, shipping companies will have a surplus of chartered tonnage for which they have no employment.
In addition, the supply-demand imbalance will be exacerbated by the delivery of newbuild vessels of more than 2 million TEU this year, mainly of larger sizes, shifting the incumbent vessels to secondary trades.
This could finally bring an end to the gap between an ailing sea freight market and a healthy charter market.
Indeed, analysts are now beginning to halt the protracted container ship charter bull market.
“We expect the charter market to weaken, particularly from the fourth quarter as the extreme shortage of available vessels will no longer be the dominant factor and charter rates and asset prices will continue to fall,” Maritime Strategies International said in its Horizon – June report.
Meanwhile, Alphaliner reported this week that there had been a “significant increase in tonnage” for open charter vessels under 3,000 TEU and that “the return of ‘spot’ vessels is beginning to take its toll on charter rates”.
And it saw a drop in daily rental rates for all sizes under 3,000 TEU.
The adviser said that one is “already observing reduced tariffs and shorter periods for the unemployed ships that are idle”.
“If demand does not pick up strongly in the coming weeks, this trend could also affect ships with a more advanced position, especially in Asia,” said Alphaliner.
“Globally, the market outlook for non-operating container ship owners remains extremely uncertain due to an ongoing gloomy macroeconomic environment,” it said.
Notwithstanding the slowdown in the charter market in the smaller sectors, which tend to be locked in for shorter periods and are therefore subject to charter contracts expiring earlier, shipping companies will seek to return as much excess chartered tonnage from their fleets to owners as possible in the coming months.
In addition, brokers have reported The Loadstar that a number of ships with unexpired charter contracts are entering the “sub-rental” market.
“If the shipowner has no employment for the ship, it is better to get an offer to sublease than to decommission the ship, even if the price is less than the daily rental rate they pay, so they can recoup some of the charter expense,” said a broker contact.
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