Maritime analyst Alphaliner has called 2016 the worst year on record for the container charter market as charter rates tumbled to historical lows for certain ship sizes, with little prospect for improvement during 2017 in the absence of any economic recovery.
The analyst said the forced cascading triggered by the incessant flow of mega-ship newbuildings and New Panamaxes continued to create havoc all through the year among the smaller sizes, while Hanjin Shipping’s collapse flooded an already gloomy charter market with modern units of 4,200 to 13,100 twenty-foot-equivalent units that were hitherto locked in long-term charters or in financial leases.
“Only a handful of modern and fuel-efficient vessels managed to obtain more decent conditions, although rates are not rewarding enough to repay the investments,” Alphaliner said in its weekly newsletter.
Flexible charters, with periods such as 1 to 6 months or 2 to 12 months, ruled the market, and demand was generally insufficient to absorb redundant capacities. Rampant protectionism and isolationist politics could also affect trade volumes with their negative impact on international trade.
The analyst said that although rock bottom freight rates on most long-haul trades severely impact the bottom line of ocean carriers, the non-operating owners — the companies that hired their ships to carriers — were themselves not spared, with record unemployment levels pushing charter rates down to the levels typically seen for the operating expenses of medium-sized ships of 2,000 to 9,000 TEUs.
“The NOOs bear the brunt of the tonnage redundancies as the carriers redelivered chartered units at an unprecedented pace. Those much exposed to the classic Panamax market [4,000 to 5,100 TEUs] are the most distressed,” the analyst noted.
The hard decisions that need to be taken by Panamax shipowners include scrapping 10-year-old ships on the eve of their second Classification Special Survey. Many cash-strapped owners can’t afford the survey-related costs, and the vessels are instead being laid up, sold for scrap, or sold to bargain buyers at distressed prices, Alphaliner noted.
The value of second-hand Panamax container ships has plunged, coinciding in a surge in their unemployment level to an all-time high as larger vessels can now transit the widened Panama Canal.
The value of a 4,250-TEU Panamax ship built in 2009 dropped by just more than 45 percent in September, while a 2011-built ship’s price was down 39 percent, according to vesselsvalue.com, an online ship valuation analyst.
Larger post-Panamax ships have seen the greatest softening in 10 years, with the price of a 7,000-TEU, 2005-built vessel falling by just more than 50 percent in September and a 2016-built ship dropping by more than 19 percent.
“The combined factors of the expansion of the Panama Canal, the industry’s pursuit of greater economies of scale and the depressed market, of which Hanjin is a victim, mean that the difference between Panamax and post-Panamax container values is growing,” said William Bennett, senior analyst at vesselsvalue.com.
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