The container charter market is facing a series of headwinds, including depressed cargo rates on key routes, rising oil prices, bearish economic figures in major nations, and growing overcapacity. Despite these challenges, the market has displayed remarkable resilience, experiencing only modest declines, according to Alphaliner.
The Alphaliner Charter Rate Index (ACI), though at its lowest since December 2020, remains 30 percent higher than December 2019, indicating a significant improvement compared to pre-pandemic levels. This robust performance is in stark contrast to the challenging year of 2016 for the industry, where charter rates hit a low point.
A key factor contributing to the market’s resilience is the limited supply of ships, particularly in the larger sizes exceeding 3,000 twenty-foot equivalent units (teu). These larger vessels are in high demand, and their charter rates have remained healthy, especially for the latest generation of energy-efficient tonnage.
However, the situation is different for vessels below 3,000 teu, as oversupply affects the 1,500-1,900 teu and 500-1,200 teu segments. Charter rates for these sizes are under pressure, but they would be worse if carriers were not actively seeking modern fuel-efficient ships and willing to pay a premium for them.
Despite its current resilience, the container charter market faces challenges from a continuous influx of new ships, causing overcapacity issues to trickle down into other segments. This includes larger tonnage, particularly older, less efficient units.
Alphaliner predicts a slow but steady decline in the charter market, at least until after the Chinese New Year. To regain a healthy trading environment for carriers and benefit the container charter market, a strong increase in ship demolitions and a surge in cargo demand across the board will be necessary.
VLCS Segment 7,500-13,000 teu
In the VLCS segment, Singapore-based PIL has secured four compact container vessels of 7,500 teu. Two ships from Regional Container Lines (RCL) have been chartered for 24 months, while two units from Taiwanese carrier TS Lines are fixed for 36 months, with deliveries expected in 2024-2025. Charter rates for these modern, energy-efficient vessels are around USD 40,000 per day, demonstrating strong demand in this segment.
LCS Segment 5,300-7,499 teu
The LCS segment has seen limited activity due to low supply. HMM sublet the 6,765 teu HYUNDAI SINGAPORE to OOCL for six months at USD 28,500 per day. Although rates have slightly declined, this deal ensures profitability for HMM.
Classic Panamaxes (4,000-5,299 teu): Rates in Slight Correction
Charter rates for classic panamaxes have softened, with 4,250 teu units getting fixed at USD 18,000 per day for twelve months. Despite this correction, the supply of tonnage remains limited, with four vessels expected to become available by year-end.
3,000-3,800 teu Segment
In the 3,000-3,800 teu segment, CMA CGM extended the 3,768 teu HENG HUI 5 for two months at USD 16,500 per day. This segment has been impacted by developments in neighboring sizes, primarily the ‘classic panamaxes.’ Four ships are expected to become available for employment by the end of November.
2,700-2,900 teu Segment
Charter rates for 2,700-2,900 teu units continue to gently decline, particularly in Asia. Maersk fixed a 2,872 teu unit for a short period at USD 15,500 per day, while details about the charter of the 2,888 teu BRIGHT SAKURA remain undisclosed.
2,000-2,699 teu Segment
CMA CGM extended the 2,190 teu AS ANNE (SDARI 2100) for twelve months at USD 17,250, reflecting both the ship’s energy-efficient profile and its deployment in the Americas. In contrast, fixtures for standard 2,500 teu tonnage in Asia are concluded at lower levels of around USD 14,000 per day.
1,500-1,900 teu Segment
Overcapacity in the 1,500-1,900 teu segment has worsened, with 17 vessels available in Asia by the end of October. However, charter rates remain stable for now. Modern, energy-efficient ‘Bangkokmax’ units are getting fixed for around USD 12,000-12,500 per day in Asia and higher rates in the Atlantic.
1,250-1,499 teu Segment
Charter rates in the 1,250-1,499 teu segment have experienced a slight erosion, especially in Asia. The 1,300 teu ‘MRC 1100’ and ‘Weihai 1300’ types are being fixed at around USD 12,000 per day West of Suez. Five ships are available for charter by the end of October, three in Asia and two in the Atlantic.
1,000-1,249 teu Segment
Overcapacity is increasing in the 1,000-1,249 teu segment, with a dozen ships open for charter by the end of October, mostly in Asia. Despite this, charter rates remain stable but have weakened in Asia. The 12-month charter rate for a standard 1,000 teu unit is around USD 10,250 per day, with slightly better rates for specific trades.
Sub-1,000 teu Segment
The sub-1,000 teu segment has seen a rapid increase in overcapacity, with 22 vessels available for charter in the next four weeks. Rates remain firm in the Atlantic, with the 862 teu Sietas Typ 168 ‘workhorse’ fetching over USD 11,000 per day.
Despite the headwinds, the container charter market remains dynamic, with varying conditions across different size segments, highlighting the importance of supply and demand dynamics and the quality of tonnage in securing profitable charter rates.