The Struggle and Strategies of Smaller Containerships

Credits: Nathan Cima/Unsplash

The realm of smaller containerships is encountering stormy seas as the industry grapples with declining employment opportunities, plummeting charter rates, and the looming shadow of overcapacity. Subletting practices and a surge in newbuilds are further complicating the landscape, presenting ship owners with a complex set of challenges to navigate. Highlights theloadstar source.

  • Smaller containerships face declining employment prospects and extended idle periods, with sub-letting adding to overcapacity concerns.
  • Charter rates are plummeting, even impacting panamax vessels, reflecting challenging market conditions and newbuild influx.
  • MPC Container Ships reports profitability but anticipates future challenges from a substantial orderbook, pointing to potential turbulence ahead.

Sub-letting Impact

The future employment outlook for smaller containerships is dimming rapidly as owners face the grim reality of extended idle periods for their vessels due to expiring charters. To exacerbate the situation, the open tonnage lists are being swamped by sub-lets, wherein long-term charterers seek to alleviate the burden of their hire contracts by re-leasing ships to third-party operators, often at reduced daily rates.

Overcapacity Struggles

According to maritime consultancy firm Alphaliner, approximately 20 ships in the 1,500 to 1,900 TEU segment, primarily located in Asia, are in need of new employment by the end of September. The liner industry is entering a period described by a non-operating containership owner as “choppy waters,” with concerns over overcapacity in smaller vessel sizes persistently undermining the segment’s stability.

Market Realities

Alphaliner’s reports indicate an ongoing decline in charter rates, with a standard 1,700 TEU ship now fetching only around $11,500 per day, a value nearly matching the vessel’s operating cost. Even in the durable panamax 4,000 to 5,300 TEU sector, rates are slipping below $20,000 daily. Recent instances include the sub-let charter of the 2003-built 4,252 TEU Alexander Bay by Maersk at $18,150 per day for a period of nine to twelve months.

Challenges Persist

While the larger-sized vessels fare relatively better in the charter market’s resilience, Alphaliner predicts that daily hire rates for these vessels will eventually weaken due to the pressure stemming from the continuous influx of newbuildings. The overall trading environment remains difficult, driven by challenges on both the cargo and supply fronts. Higher cargo demand is a potential remedy, but it seems unlikely given the current global trends of inflation and higher interest rates affecting consumer spending power. The supply side isn’t expected to alleviate the situation, as newbuild tonnage of all sizes is continuously flooding the market.

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