- The container market continues to thrive despite tonnage short caused by ships taken out of service due to scrubber retrofitting.
- 44 containerships with a total capacity of 436,000 teu, are in dry dock for the installation of exhaust gas cleaning systems.
- Liners have turned to the Panamax fleet due to replacement vessels in the larger sectors being sold out.
According to an article published by The Loadstar, the container charter market remains robust, buoyed by a shortage of tonnage caused by the substantial number of ships taken out of service for scrubber retrofitting.
Installation of exhaust gas cleaning systems
According to Alphaliner data, there are 44 containerships, for a total capacity of 436,000 teu, in dry dock for the installation of exhaust gas cleaning systems.
These will enable the vessels to continue to bunker with cheaper HFO (heavy fuel oil) after the IMO’s 0.5% sulphur cap on marine fuel becomes law on 1 January.
“Despite the onset of the slack winter season on the cargo front, demand for container tonnage remains sustained, with activity in the charter market showing no significant signs of weakening,” reported the consultant.
Increase in demand for Panamaxes
Alphaliner said the highlight of the previous two weeks had been a renewed rally in demand for the ‘classic’ Panamax sizes of 4,000-5,100 teu, with a “substantial number of fixtures concluded”.
As a result, daily hire rates for Panamax vessels ticked up again and now stand at over $14,000.
A broker said he was working a young Panamax ‘on subs’ at $16,000 a day, with the container line charterer agreeing to pay for positioning and some other costs.
Today’s rates are a far cry from the parlous situation that existed in early 2017 when brokers “couldn’t give away” Panamax ships and owners counted themselves lucky if they achieved over $5,000 a day. They mostly also had to pay to position the ship and agree to the charterer’s ‘flexible’ options charter party clauses.
Smaller vessels gradually replaced by Panamax vessels
The glut in the ship type followed the completion of the expansion of the Panama Canal, in June 2016, when over 100 Panamax vessels, previously the workhorses of the waterway, were gradually substituted by larger, more economical ships.
As a consequence shipowners were unable to cover operating costs, persuading many to ‘wash their faces’ and consign Panamax ships as young as seven years old to the scrapyards of Asia. But for others, with hefty mortgages on vessels that had lost more than 50% of their asset value, there was only one option left: bankruptcy.
Market volatility a major issue
And the broker source admitted that he did not know how long the current market would survive for his Panamax owners.
“They (owners) are just making hay while the sun shines,” he said. “At the moment it doesn’t matter if the ships have scrubbers fitted or not, but I can see that that will become an issue in the market by December, and that will coincide with most of the carriers’ getting their fleet back from the yards.”
The liners have turned to the Panamax fleet due to replacement vessels in the larger sectors being ‘sold out’, and brokers report there has been an increasing trend for carriers to charter-in two Panamax ships to replace one ULCV.
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Source: TheLoadstar
