Maritime Rush To Charter More Ships Amidst Red Sea Conflict

The security situation and diversions in the Red Sea have compelled container lines to seek additional ships, impacting both spot container freight rates and charter rates. The ongoing coalition air strikes in Yemen have heightened the urgency, with the recent spike in spot rates prompting a rush for immediate tonnage, says an article published on freight waves website.

Summary

• The security situation and diversions in the Red Sea have led to an increased demand for additional ships, impacting both spot container freight rates and charter rates.
• Charter rates are on the rise, particularly for short periods ranging from three to six months. The need for prompt vessels has led ship owners to adopt a more bullish approach, pushing for higher rates across various segments and regions.
• The initial diversions from the Red Sea caused delays, prompting liners to charter ships for short terms as “extra loaders.” With diversions becoming more established, liners are now compelled to add additional vessels to maintain schedules.
• The global spot freight indexes have more than doubled due to Red Sea-driven moves, significantly outpacing the increase in charter rates. The persistent crisis in the Red Sea and potential issues at the Panama Canal could mitigate overcapacity risks.

Increased Demand For Charter Ships

Charter rates are on the rise, particularly for short periods ranging from three to six months. The need for prompt vessels has led ship owners to adopt a more bullish approach, pushing for higher rates across various segments and regions. The Red Sea crisis, coupled with diversions, has fueled a surge in chartering activity.

Impact On Charter Rates And Ship Availability

The initial diversions from the Red Sea caused delays, prompting liners to charter ships for short terms as “extra loaders.” With diversions becoming more established, liners are now compelled to add additional vessels to maintain schedules, contributing to the increased demand for charter ships. The Harpex index, measuring charter rates for ships with a capacity of up to 8,500 twenty-foot equivalent units, has risen by 12% since mid-December.

Red Sea Crisis And Global Shipping Dynamics

The global spot freight indexes have more than doubled due to Red Sea-driven moves, significantly outpacing the increase in charter rates. Despite expectations of a weak year for charter rates in 2024, the Red Sea effect has led to a 28% higher Harpex index compared to January 2019, pre-COVID. The persistent crisis in the Red Sea and potential issues at the Panama Canal could mitigate overcapacity risks.

Limited Availability Of Charter Ships

The current challenge in the chartering market is the scarcity of available vessels, as most tonnage is already committed to long-term leases. Non-operating owners (NOOs) have maintained control, dictating terms and demanding historically high charter rates during peak periods. Liner companies, facing limited availability of prompt tonnage, are experiencing low chartering activity.

Stock Market Impact

Liner company stocks, including Zim, Hapag-Lloyd, and Maersk, have seen significant increases due to disruptions in the Red Sea, outperforming NOO stocks. Shares of NOOs like Danaos, Costamare, Global Ship Lease, and Euroseas have seen more modest gains, reflecting the challenges and constraints in the current chartering market.

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Source: freight waves

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