Published Dec 28th, 2024 by Alphaliner
After a frantic November, with a high level of fixtures concluded the container charter market has gone significantly quieter in the last few days, giving the feeling that the traditional Christmas lull is already on its way.
Although the activity is down compared to previous weeks, the mar- ket is ending 2024 on a very strong note for non-operating owners (NOOs), with a combination of short vessel supply above 2,000 teu and a robust demand supporting healthy charter rates.
For tonnage providers, the year 2024 was actually significantly better than 2023. Demand has been robust during the whole year, and due to a fast-dwindling availability of tonnage in most size groups, charter rates have been on a continuous rising trend.
As of 10 December, the Alphaliner Charter Rate Index (ACI) was near- ly three times as high as in January 2024, reaching its best ever level outside of the exceptional post-COVID demand boom years of 2021 and 2022.
The market’s good fortunes were caused by both geopolitical and economic developments. On the geopolitical front, the continued cri- sis in the Red Sea forced most container shipping lines to keep di- verting their ships via the Cape of Good Hope.
This created a major extra teu-mile demand requiring an estimated 10-15% additional tonnage.
Meanwhile, on the economic front, cargo demand across the globe was stronger than expected and was estimated to have risen by around 6.5% in the first nine months of the year, against a backdrop of reduced inflation, particularly in developed countries.
As a result of these developments, the enormous newbuilding capaci- ties, with 3 M teu of new ships hitting the water this year, were, unex- pectedly, absorbed rather easily.
Demand for charter tonnage also spiked which eventually saw char- ter rates nearly double from their 2023 levels in a context of ever tighter supply, especially in the larger vessel sizes.
Cargo rates meanwhile were much stronger than in 2023, which trig- gered a fast improvement in carriers’ financial results, which became particularly noticeable in the second half of the year.
However, rates have been softening significantly since July but are yet ending 2024 around 25% higher than a year earlier according to the Shanghai Containerized Freight Index (SCFI).
The charter market prospects for 2025 depend very much on geopol- itics, with the key question being to know when the Red Sea crisis will end, and the Suez route be widely used again.
Given an extra 2 M teu of newbuilding capacity expected to join the world fleet in 2025, a re-opening of the Suez route might create over- capacity, with larger vessels particularly exposed and not necessarily easy to transfer to other trade routes.
Should the crisis continue, the market could be up for another strong year, although it remains to be seen if all the newbuilding will be ab- sorbed as easily as in 2024, given continued low demolition figures and uncertainties regarding cargo demand.
VLCS segment (7,500-11,000 teu): quiet again after fixing spree
The ‘handy’ VLCS segment went quiet again in the past fortnight, af- ter an incredibly high volume of fixing recorded in the previous weeks. The highlight of the last few days was a reported fixture by ZIM of four 7,900 teu newbuilding container vessels ordered by Greek owner George Economou from South Korean builder HJSC (former Hanjin Shipyard).
Although the terms of this fixture have not been fully confirmed, the ships are believed to have been chartered for durations of seven years at a charter rate in excess of USD 40,000 per day.
Otherwise on the supply front this segment remains sold out in terms of prompt ships and the forward availability is slim. As a result, char- ter rates are expected to stay very firm in these sizes in the foreseea- ble future.
Reduced activity in LCS sizes (5,300-7,499 teu) on lack of ships
The fixing activity shrank further in the past fortnight in the LCS seg- ment, mainly because of a continued shortage of prompt ships and limited supply going forward.
Demand is otherwise still very much alive with Alphaliner understand- ing that some charters have been agreed on further newbuildings of 6,000 teu.
Apart from that a German-controlled 5,500 teu unit is understood to have been sublet for a short period at a rate in the region of USD 75,000 per day.
Strong conditions persist for Classic Panamaxes (4,000-5,299 teu)
Demand for ‘classic panamax’ tonnage is showing no sign of easing despite a lower activity essentially due to a very limited supply of available tonnage.
The highlight of the past fortnight was the fixture, respectively exten- sion, by OOCL, of two 5,095 teu units, the ‘Hyundai 5000’ ORCA I and DOLPHIN II for periods of 36 months at USD 36,750 per day.
These terms are in line with earlier fixtures concluded on slightly smaller vessels and illustrate a stability for this segment.
3,000-3,800 teu sizes deliver continuously healthy rates
Despite a contracting fixing activity, with only one fixture reported in the past fortnight, versus four in the previous two weeks, the 3,000- 3,800 teu segment is still returning healthy charter rates, in a con- text of short vessel supply.
The only fixture recorded by Alphaliner in the last days concern an interesting ship, the 3,739 teu LTC JOHN U.D. PAGE. This US-flagged vessel, controlled by US shipowner Sealift Inc is traditionally used on US military or US government contract businesses.
But the dearth of container tonnage and the current remunerative charter rates seem to have convinced its owner to trade the ship on civil contracts.
The ship, which was originally built for German owner Hamburg Sud as the CAP SAN NICOLAS was reportedly picked up by Hapag-Lloyd for a period of 30-33 months at USD 31,000, a rate in line with earli- er fixtures concluded on comparable tonnage.
2,700-2,900 teu: high monies still paid for efficient ‘Chittagongmaxes’
The popularity of ships of 2,700-2,900 teu is showing no sign of fad- ing with charterers, particularly the modern ‘fuel-efficient’ ‘Chittagongmax’ units of 2,800 teu which continue to obtain very ro- bust charter rates.
Illustrating this, Hapag-Lloyd snapped up in the Atlantic the 2,782 teu, Tsakos-controlled and scrubber-fitted IRENES REWARD (‘Hyundai CGX 14 2800’) for a period of 24 months at a handsome USD 36,000 per day.
By contrast, the more standard, 2,702 teu BUXMELODY (‘Thyssen 2500L’) was extended in Asia by OOCL for the same period at only USD 25,000 per day. Of note this vessel has no scrubber.
With a limited supply of ships going forward and a continued demand from charterers, this segment should continue to enjoy strong conditions, particularly for the most modern and fuel-efficient units.
Muted activity in 2,000-2,699 teu segment
For the first time in many weeks, Alphaliner did not record a single fixture in this segment in the past fortnight.
This is mainly due to the shortage of ships since the underlying de- mand is still alive.
Based on the last fixtures concluded, Alphaliner is still assessing standard units of 2,500 teu at around USD 30,000 per day for em- ployments of 12 months.
1,500-1,900 teu: the busiest segment
The 1,500-1,900 teu segment was again the busiest in the past fort- night with Alphaliner recording fourteen fixtures. The continued high demand is having a positive impact on supply which continues to re- cede.
As a result, charter rates remain elevated, with a slight upward mo- mentum.
At the moment, modern ‘Bangkokmax’ tonnage of 1,800 teu can be fixed in the region of USD 26-27,000 per day for employments of 12 months, and in some cases up to USD 30,000 for some specific trades.
Standard tonnage of 1,700 teu is meanwhile assessed in the region of USD 22,000 per day for similar contracts, with shorter durations commanding substantially higher levels.
1,250-1,499 teu sizes remain bullish
The 1,250-1,499 teu segment remains healthy, with a very limited supply of prompt ships and continued demand from carriers.
As a result, charter rates stay healthy, with the 1,440 teu ‘Hegemann 1400’ type still fixable in the region of USD 17,000 in the Atlantic (depending on the duration of employment) and the 1,296 teu, high- reefer ‘CV 1200’ type obtaining close to USD 18,000 in the Americas for employments of 12 months.
Stable conditions in 1,000-1,249 teu sizes
The fixing activity continued to recede in the 1,000-1,249 teu seg- ment in the past fortnight with only five fixtures concluded.
As demand falls and supply remains adequate, charter rates fail to progress further and are globally stable, with the standard 1,000 teu type still fixable in the region of USD 14,000 per day for regular em- ployments of 12 months.
However certain difficult trades are commanding substantial premi- ums as illustrated by the fixture of the 1,118 teu LILA CANADA for 12 months at a robust USD 20,000 per day, with the vessel expected to trade to Ukraine.
Otherwise, a fuel-efficient vessel, the 1,103 teu SCION MAFALDA (‘SDARI 1100’) was reported extended by CMA CGM for 24 months at USD 15,000 for trading between Southeast Asia and Australia.
Atlantic drives sub-1,000 teu sizes
The sub-1,000 teu segment saw activity picking up in the last fort- night, with the vast majority of fixtures concluded in the Atlantic mar- ket.
Charter rates are generally stable and most periods are for typically 3 to 6 months and occasionally 12 months.
Supply appears to be receding a little bit although the Atlantic still gives carriers enough choice when it comes to fixing relatively stand- ard ships.
The 868 teu gearless ‘Sietas 168’ type, which acts as a bellwether for these sizes is currently getting fixed in excess of USD 11,000 per day in the Atlantic, for employments of 6 months, in line with earlier fixtures.
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