When demand to transport cargo weakens, short-term rental rates decline for the ships that carry that cargo. When freight demand rises, lease rates rise. You can see this now in spot rates for supertankers moving crude oil from the Middle East and large bulkers moving iron ore to China (weak demand, low rates) and for product carriers moving diesel, gasoline and jet fuel (high demand, high spot rates).
You can’t see it in container shipping, though. At least, not yet.
The container freight market is awash in negative sentiment on import demand, yet short-term ship charter rates remain stratospherically high.
“The charter market is undeterred by the weaker sentiment across the global shipping industry and remains extremely strong,” affirmed data provider Alphaliner on Wednesday. “Charter rates continue to evolve at historic highs with, remarkably, some further gains achieved by certain sizes.” There is “a continued bonanza.”
Operators still hungry for ships
Alphaliner reported that BAL Container Line has just chartered the Northern Prelude (built in 2009, capacity: 4,600 twenty-foot equivalent units) for $160,000 per day for 40-60 days.
It also reported that Sinotrans has chartered the 2021-built, 2,743-TEU X-Press Mekong for $149,000 per day for 40-45 days. “This rate … is not far off the historical high of $175,000 per day [for that size category] obtained in January,” said Alphaliner.
Even the very smallest ships — in the sub-1,000-TEU category — “continue to generate staggering rates.” Ships with capacities of just 700-800 TEUs are being employed at $20,000-$30,000 per day. Most recently, SITC chartered the 2008-built, 724-TEU Atlantic Pioneer for $30,000 per day.
Why the disparity between the charter market and the freight market? Freight rates are off their peaks and still softening, yet they’re still extremely high — high enough for ship operators to generate profits even if they’re still paying sky-high charter rates.
According to Alphaliner, “The continued fall in spot rates on most major routes is obviously a concern, but they remain at historical highs for now, giving both NOOs [non-operating owners, the companies that lease ships to liners] and charterers confidence in short-term market prospects.”
For NOOs, “the short term remains bright.”
And despite medium- and long-term concerns on rising capacity given new ship deliveries in 2023-25, there are still multiyear charters being inked at very strong rates. Alphaliner reported that ocean carrier Zim (NYSE: ZIM) just chartered the 4,520-TEU, 2011-built sister ships Seaspan Chiba and Seaspan Kobe for five years at $43,000 per day.
No collapse in charter rates yet
Data from companies that track charter rates does not indicate a market collapse. On the contrary, it shows a market that’s holding at or near the high point.
Brokerage Harper Peterson & Co. publishes the Harpex index. The index (covering 700- to 8,500-TEU ships) peaked in mid-March, dipped slightly through April, held steady in May and began rising again this month. The Harpex is currently down 3% versus its peak, but still more than double its level at this time last year.
Alphaliner tracks average rates over time, estimating rates for 12-month charter durations. (These figures are assessments only, given the lack of available ships for rent and the rarity of 12-month deals.)
For 8,500-TEU container vessels, it currently assesses rates at $150,000 per day, just below the $155,000-per-day record hit in late March to mid-April. The current rate is up 114% year on year (y/y).
For 5,600-TEU ships, it puts rates at $130,000 per day. That’s the all-time high and up 110% y/y. It assesses 4,000-TEU ships at $110,000 per day, an all-time high and up 93% y/y, and 2,500-TEU ships at $76,000 per day, just below the peak of $80,000 per day in February to early May and up 105% y/y.
Alphaliner puts one-year rates for 1,700-TEU ships at $58,000 per day, near the all-time high of $62,500 per day in late February to mid-May and up 71% y/y. It estimates charter rates for 1,000-TEU container ships at $32,000 per day, down materially — 36% — from a brief high of $50,000 per day reached in early March, albeit still up 68% y/y.
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