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Container ship charter rates on a high
Container ship operators are paying increasingly high charter rates for longer periods as they seek to capitalize on significantly high rates in the container freight spot market amid unprecedented demand, says a report by David Lademan, Greg Holt, and Ayush Verma of S&P Global Platts.
Excerpts from their analysis:
Container ship charter rates sank to multiyear lows in June 2020 due to bleak carrier outlook and premature returning of chartered vessels as the Coronavirus outbreak presented a major demand risk.
But as community lockdowns and social distancing unexpectedly boosted consumer spending on goods, charter rates rebounded and broke through to fresh all-time highs at the start of August, Harper Petersen & Co. data showed.
Six- to 12-month time-charter rates for a ship with a capacity of 8,500 twenty-foot equivalent units registered $105,000/d Aug. 2, a jump of more than 425% from the year-ago assessment of $20,000/d.
Short-term fixtures, where rates are highest, do not make up the bulk of fixturing activity. Just 5% of 2021’s container ship fixtures to date have been for periods of three months or less, London-based shipbroker Braemar ACM said.
And tonnage providers have confirmed as much in their earnings statements. Navios Maritime Partners said it saw large increases in fixture earnings and elongated time periods.
Spot rates surge
A surge in global container freight spot rates beginning in the second quarter of 2020 brought new record highs in many key head haul trades and cascaded into ancillary markets.
The Platts Container Freight Index, a weighted average of Platts’ global assessments, was assessed July 30, 2020, at $1,255/forty-foot equivalent unit (FEU) and has steadily increased through Aug. 2, 2021, when it was assessed at $7,360/FEU.
This represents an increase of 487% on the year.
These strong fundamentals have contributed to carrier appetite for additional vessel capacity to meet swelling demand, which is the underlying factor in charter market gains.
Sources expect further increases as carriers desperate for additional capacity attempt to outbid each other on price and charter length.
This is against a backdrop of historically low, idle, or unused ship counts. Only 2.5% of global capacity is idle right now, compared with 10% on the year-ago date, according to container researcher Alphaliner.
Since the year-ago date, fixture rates for the 8,500 TEU ship class have increased on average by 3% weekly but saw a high of 13% on July 2.
Meanwhile, the 3,500 TEU Panamax class had the largest year-on-year growth at 688% to $67,000/day. Small “feeder” ships of 700 TEU showed the smallest increase at 311% on the year, while the average change across all vessel classes was 545%.
According to Braemar ACM, relatively few container ships are set to be delivered in 2021 through 2022, with annual fleet growth expected at 3.5%, likely less than annual demand growth.
Coupled with strong projections for demand-side momentum, a tight order book could support freight rates or ease their decline until significant capacity increases hit the market.
source- eximin.net
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