Tight Container Ship Market Sees Hike in Rates in 2021

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  • Spot freight and timecharter rates hit levels not experienced in more than 10 years in Q4 2020.
  • It is propelled by a tight container ship market, shortage of equipment and ramp-up in restocking demand and consumer spending.
  • Operators would like to see those rates last into the new year.
  • While prudent ordering will most likely continue in the container ship sector, LNG-fuelled tonnage will continue to grow.

According to a recent news article published in Riviera, container shipping in 2021 is to go strong in terms of rates and weak in terms of newbuilding.

Bullish on the demand outlook for 2021

While it is bullish on the demand outlook for 2021, MSI cautions “the longer-term impacts of the economic fallout from Covid-19 in terms of unemployment, business closures and fiscal strains in emerging markets remain to be seen.”

Ship valuations rise

With rates increasing threefold for 8,500-TEU container ships, there was a knock-on effect on ship valuations.

Valuations for large five-year-old container ships – 18,000-TEU and 13,000-TEU units – recovered from their historic lows in June 2020, increasing in value by 18% in Q4 2020, according to VesselsValue.

Fleet renewal slow

In its Shipping Market Review, Danish Ship Finance points out that fuel and technology considerations kept investors from ordering new vessels over the last two years, and the coronavirus “seems to have amplified this trend.”

As of September 2020, only 30 vessels totalling 177,434 TEU were ordered, corresponding to 0.8% of the fleet, down from 4% in 2019.

“Newbuilding contracts, albeit being few, show Chinese owners placing orders at Chinese yards. The orderbook amounts to 2.1M TEU, equal to 9% of the fleet – the lowest level in decades. Of this, 65% is scheduled to be delivered by mid-2021.”

 

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Source: Riviera