Despite facing numerous challenges, the container charter market is demonstrating remarkable resilience with charter rates finding stability across the industry. The market continues to witness a majority of fixing activities in vessels under 3,000 twenty-foot equivalent units (TEU), while larger-sized vessels are experiencing a dearth of business, primarily due to the ongoing shortage of readily available ships in these segments.
Supply is gradually decreasing in the under 2,000 TEU category, but the 1,500-1,900 TEU segment is still struggling, with approximately fifteen vessels in Asia awaiting employment by the end of October. Moreover, the 1,000-1,250 TEU category is also seeing a reduced number of ships available for charter in the coming weeks, largely due to unexpected strong demand.
This resilience in the charter market is noteworthy considering the various challenges the industry currently faces. Cargo rates remain unsatisfactory on several key routes, largely influenced by insufficient demand and increasing overcapacity. On Friday, the Shanghai Containerized Freight Index (SCFI) experienced its largest drop since November 2022, down 5.1% at 949 points. This sharp decline is being observed on major East-West corridors and trade routes to West Africa and South America, which were previously more stable.
The constant influx of large newbuilding tonnage is exacerbating the situation, prompting carriers to reduce capacity more aggressively than usual in an effort to combat the ongoing decline in freight rates. This is evident in the higher number of blank sailings anticipated during China’s upcoming Golden Week in early October on East-West routes, with Maersk, MSC, Hapag-Lloyd, and other carriers cancelling departures and downsizing fleets.
While demolition activity remains low, rising oil prices are further complicating the situation. The short-term outlook for the container market remains challenging, as container trade growth is expected to be nearly stagnant in 2023, while over 2 million TEU of newbuild capacity is scheduled to enter the market by year-end. Looking ahead, the container shipping industry is in for a bumpy ride.
The container charter market is showing resilience, with rates stabilizing despite challenges. Most activity is under 3,000 TEU vessels, while larger ones face shortages. Supply is declining under 2,000 TEU, but the 1,500-1,900 TEU segment struggles with around fifteen available vessels in Asia by October.
Conclusion per TEU classification
The 1,000-1,250 TEU category sees fewer ships for charter due to strong demand. Cargo rates are unsatisfactory on key routes, and the Shanghai Containerized Freight Index (SCFI) recently dropped by 5.1%. Overcapacity and newbuild tonnage exacerbate the situation.
The market’s short-term outlook remains challenging, with little container trade growth in 2023. In the VLCS segment, there are no fresh fixtures, and the LCS segment remains muted. Classic panamaxes see stabilizing rates.
The 3,000-3,800 TEU segment shows little movement, and fewer ships are available in the 2,700-2,900 TEU range. Rates stabilize in the 2,000-2,699 TEU segment.
The 1,500-1,900 TEU sizes face overcapacity, impacting rates. The Atlantic outperforms Asia for 1,000-1,499 TEU ships. Activity increases in sub-1,000 TEU sizes, particularly in the Atlantic.