London -- Container ship charter rates have plumbed new lows as ocean carriers trim their fleets and press ship owners for deeper discounts amid slowing cargo volumes and sagging freight rates on most liner trade routes.
Carriers are returning record numbers of ships to their owners as they come off hire rather than renew charters even at current depressed rates, with many of the vessels joining a growing pool of laid-up tonnage.
With cargo volumes not expected to pick up until the end of the year at the earliest according to the most optimistic forecasts, carriers are reluctant to fix ships for long periods, opting instead for ad-hoc deals to plug temporary gaps in their fleets which they can't fill with their own vessels.
Average daily rates for a 1,100-TEU ship on a 12-month charter have fallen to $4,564 this week from $4,992 at the beginning of the year and $12,758 in early May 2008, according to the Hamburg Shipbrokers Association. A 2,500-TEU vessel on a 24-month charter is fetching $6,351, down from $9,966 in early January and just over $25,000 last May.
The Association's closely watched ConTex index is still retreating, falling to 283 on March 19, down from 354 at the beginning of 2009 and less than a third of the 974 it reached in early May 2008.
Rates for larger ships also are in freefall with a 3,500-TEU gearless Panamax vessel earning $9,500 a day compared with $11,000 in December and a 2008 average of $26,125, according to London shipbroker Clarkson. In 2005 a similar sized ship was earning an average of $38,427 a day.
The number of ships being laid up is slowing, according to AXS-Alphaliner, the Paris-based consultant. An additional 30 vessels of 60,000 TEUs were idled in the two weeks to March 16, compared with 61 ships of 250,000 TEUs in the previous two week period.
But the number of jobless chartered ships grew, accounting for 243 of the 484 laid-up vessels on March 16.
Charter ship-owners face further lay-ups and falling hire rates as ocean carriers cull their hired fleets as cargo demand continues to shrink. French carrier CMA CGM has returned around 50 ships since the beginning of the year and has another 130 vessels whose charters expire before the end of 2009.
Charter ships make up nearly 47 percent of Mediterranean Shipping Co.'s fleet and around 43 percent of Maersk Line's fleet, according to AXS-Alphaliner.
With a steadily widening gap between charter rates and freight rates, carriers are losing money on the ocean leg and are pressing owners for discounts on existing deals with the promise of paying more when they renew charters.
The downward pressure on charter rates will ease if carriers are able to enforce the higher ocean freight rates due to take effect on April 1 on many routes, including the bellwether Asia-Europe trades.
Source: Journal of Commerce, January 20, 2009
