• DATVF.SEALAX
    0.968
    -0.130
    -11.8%
  • DATVF.VNU
    1.390
    -0.032
    -2.3%
  • DATVF.ATLPHL
    1.593
    -0.100
    -5.9%
  • DATVF.VSU
    1.236
    -0.027
    -2.1%
  • DATVF.VWU
    1.473
    -0.008
    -0.5%
  • DATVF.LAXDAL
    1.609
    0.038
    2.4%
  • DATVF.DALLAX
    0.864
    -0.091
    -9.5%
  • DATVF.VEU
    1.460
    -0.063
    -4.1%
  • DATVF.PHLCHI
    0.920
    0.000
    0%
  • DATVF.LAXSEA
    1.977
    0.114
    6.1%
  • DATVF.CHIATL
    1.867
    -0.088
    -4.5%
  • ITVI.USA
    9,629.880
    14.260
    0.1%
  • OTRI.USA
    5.620
    0.000
    0%
  • OTVI.USA
    9,622.700
    14.090
    0.1%
  • TLT.USA
    2.570
    0.000
    0%
  • WAIT.USA
    150.000
    0.000
    0%
  • DATVF.SEALAX
    0.968
    -0.130
    -11.8%
  • DATVF.VNU
    1.390
    -0.032
    -2.3%
  • DATVF.ATLPHL
    1.593
    -0.100
    -5.9%
  • DATVF.VSU
    1.236
    -0.027
    -2.1%
  • DATVF.VWU
    1.473
    -0.008
    -0.5%
  • DATVF.LAXDAL
    1.609
    0.038
    2.4%
  • DATVF.DALLAX
    0.864
    -0.091
    -9.5%
  • DATVF.VEU
    1.460
    -0.063
    -4.1%
  • DATVF.PHLCHI
    0.920
    0.000
    0%
  • DATVF.LAXSEA
    1.977
    0.114
    6.1%
  • DATVF.CHIATL
    1.867
    -0.088
    -4.5%
  • ITVI.USA
    9,629.880
    14.260
    0.1%
  • OTRI.USA
    5.620
    0.000
    0%
  • OTVI.USA
    9,622.700
    14.090
    0.1%
  • TLT.USA
    2.570
    0.000
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  • WAIT.USA
    150.000
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Company earningsMaritimeNewsOcean shipping

Liners chartering more ships to allow for IMO 2020 scrubber retrofits

PHOTO COURTESY OF SHUTTERSTOCK

Seaspan Corporation (NYSE: SSW), the largest U.S.-listed lessor of container ships, reported strong quarterly profits driven by a one-off charter renegotiation, and voiced optimistic commentary on broader market trends.

Seaspan reported net income of $285.3 million for the first quarter of 2019 compared to $67.7 million in the same period last year. The most recent quarter included a $227 million payment from one of Seaspan’s top-five charterers. It paid the fee to redeliver seven vessels ahead of schedule. Those vessels were then re-chartered to other Seaspan customers.

On the May 2 conference call with analysts, Seaspan chief commercial officer Peter Curtis reported several positive developments for container-ship lessors – including a tailwind from IMO 2020, the regulation that will cap fuel sulfur content at 0.5 percent as of January 1, 2020.

“In the first quarter, we saw stabilizing rates in the smaller vessel segments and increasing rates in the Post-Panamax size classes,” he explained. “We particularly saw an increase in March in the 8,000-9,500 TEU [twenty-foot equivalent unit] segments, where liners have been fixing vessels for longer periods at increasing rates, and where segment capacity is almost fully occupied.”

Curtis continued, “Leasing by liners with very large scrubber programs has also been very active.” Many vessel owners throughout the global shipping industry are opting to deal with the IMO 2020 regulation by installing ‘scrubbers’ – equipment that will allow them to continue to burn cheaper high-sulfur heavy fuel oil while still reducing their sulfur emissions.

To take advantage of lower fuel bills with scrubbers, ships have to be taken out of the market for installations. However, liner companies must stick to set weekly schedules, meaning that retrofitted ships must be temporarily replaced.

“The liners have been active at securing larger tonnage for longer periods, securing coverage for a year or two, as larger vessels are taken out of service for scrubber installations,” said Curtis. “This is proving to be a positive factor for charter rates, and has significantly increased charter rates in the 8,500-10,000 TEU segments, where idle capacity is almost nil at this time.”

Curtis also highlighted another positive development for charter markets stemming from port developments. “Several regions, such as Africa, Southeast Asia, India and Oceania are enjoying improving port infrastructure, opening them up to vessel segments that are larger than the traditional feeder size.

“This is allowing ‘upsizing’ in these regions,” he explained, referring to the process whereby liner companies cascade larger vessel classes into new markets to obtain economies of scale.

Upsizing has helped offset soft market conditions in the Asia-Europe container trade and “normalized” conditions in the Transpacific trade, he said, adding, “Our view is that with no newbuildings [being ordered] in the 4,250-9,000 TEU segments, the upsizing in these trades bodes well for these [vessel] segments.”

Commenting on the overall vessel-supply picture, Curtis said, “The orderbook-to-existing fleet ratio remains near all-time lows at about 11.7 percent, and orders continue to favor the larger vessels over 18,000 TEU.

“Given that the orderbook is baked in until 2021 [because any new orders would deliver after that], and that fleet capacity has increased by just 0.5 percent since the beginning of this year, we see continued improvement in the balance of supply and demand, and a more stable environment developing in the container industry.”

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Greg Miller, Senior Editor

Greg Miller covers maritime and finance for FreightWaves. He took a circuitous route to get here: After graduating Cornell University, he fled upstate New York's harsh winters for the island of St. Thomas, where he rose to editor-in-chief of the Virgin Islands Business Journal. In the aftermath of Hurricane Marilyn, he escaped the tropics for the safety of New York City, where he served as senior editor of Cruise Industry News. He then spent 15 years at the shipping magazine Fairplay in various senior roles, including managing editor. He currently resides in Manhattan with his wife and two Shi Tzus.
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