Downsizing Container Ships Demand Downturn in Zim Streamlines

July 26, 2023

Israel-based ocean carrier Zim is cutting its exposure to the freight market by offloading multiple leased vessels. Two of the early charter terminations were confirmed by the vessels’ owner.

Early Charter Terminations

Euroseas has announced the termination of charters for its vessels Rena P and Emmanuel P, with mutual consent. The ships will be rechartered to Hong-Kong based OOCL, starting in August, after being redelivered by Zim.

Originally purchased from Seaspan in May 2022, these vessels were acquired for $37 million with charters attached. Under the new agreement, the charters are set at $21,000 per day for 20 months, with an option for four additional months.

Promising Revenue Prospects

“These charters are expected to contribute between $2 million and $4 million in additional revenue”, said Euroseas CEO Aristides Pittas.

The Rena P and Emmanuel P handoff was not without hiccups, according to Braemar. “After having previously failed [to close] the deal, OOCL returned to the market and refixed [the ships]. Consequently, the owners then agreed to terminate the existing charter with Zim.”

Asked whether any termination fees were involved, a Euroseas spokesperson told FreightWaves: “There was no compensation since Euroseas chartered the vessels at higher rates. The termination was agreed, not forced. It would only occur if Euroseas managed to recharter the vessels. Otherwise, there would have been no termination.

Cutting Market Exposure

Both said Denmark-based ocean carrier Maersk has chartered the 6,078-TEU Zim Pusan for two to five months at $36,500 per day.

The 5,936-TEU Ian H, owned by Global Ship Lease, is on charter to Zim at $32,500 per day until the second quarter of next year. Alphaliner said the Ian H “has been sublet until the end of her charter to Emirates Shipping Line at $32,000 per day, according to market sources.”

“Whether this deal is completely off the table or might be resurrected at a later stage remains to be seen,” it said.

Fleet Strategy

Zim is the world’s 10th-largest ocean carrier. Unlike other shipping lines, it leases over 90% of its fleet; most carriers own around half their fleet and lease the rest.

According to Alphaliner, Zim has the highest orderbook-to-fleet ratio of any ocean carrier, at 50.6%. “Filling all these extra slots will only be realistic if Zim’s newbuildings replace other ships,” it maintained.

“We no longer anticipate an improvement in freight rates in the second half of 2023, consistent with seasonality, as previously assumed,” said CEO Eli Glickman.

“During this downturn, we will continue to actively manage and rationalize our fleet and services to maximize our cash position,” he said.

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Source: FreightWaves