HANSA 05-2020

Märkte | Markets
Pandemic knocks down boxship rates
The impact of large-scale lockdowns on the container trades intensifies, with tonnage
overcapacity surging and employment prospects dwindling. By Michael Hollmann
Although the freeze of western economies
is gradually thawing thanks to
cautious lifting of quarantine measures,
the immediate prospects for shipping
continue to worsen. Up until April, cargo
flows in the container sector appeared
to be holding up relatively well.
A lot of merchandise, ordered and produced
before the pandemic, still had to
be shipped. Now the grace period is over,
cargo volumes are disappearing at an
alarming rate. By how much trade volumes
are going to be slashed this year is
everyone’s guess. Shipping analysts have
come up with estimates of -7% to -10%
for global loaded container traffic.
However, these can be considered no
more than »spur of the moment« projections
given that the global economic implications
of the pandemic are still hard
to grasp. The situation is so volatile that
even multinational agencies are making
large caveats to their forecasts.
The World Trade Organisation (WTO)
expects world trade to drop anywhere between
13% and 32% this year, the International
Monetary Fund (IMF) ventures
a more modest -11% contraction for
trade. The short-term impact is far more
severe, with purchasing manager indices
for Europe and the US – the biggest
import markets for container shipping –
dropping like a stone in April.
Freight rates still up year-on-year
Container lines are blanking more sailings
by the week. The tally of withdrawn
sailing capacity has reached 30% in the
Far East/Europe trade for the coming
weeks. As freight forwarders currently
report tight space availability for cargo
bookings, the fall in actual trade volumes
might well be around the level of
the blanked capacity.
The carriers’ efforts have been reasonably
successful in maintaining freight
rates, with the World Container Index
(WCI) by Drewry assessing average spot
rates in the east/west trades almost unchanged
month-on-month as per end of
April, but up 11% year-on-year. To prevent
a collapse in revenue, it is absolutely
essential for container lines to efficiently
manage their capacity and maximise
freight rates.
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Much of the burden of overcapacity
will be passed on to non-operating owners.
After a prolonged period of resilience,
the charter market for container
ships came under intense pressure during
April. Redeliveries of charter ships
gathered momentum as carriers prioritise
their own vessels.
In line with another surge in idle fleet
capacity, the pool of unemployed spot
ships expanded rapidly. As per 20 April,
Alphaliner counted 183 container ships
available on spot basis, against only
115 four weeks prior. Panamaxes, gearless
2,700/2,800 TEU, midsize 1,600-
1,800 TEU and the smallest feeder vessels
below 1,000 TEU recorded the steepest
increases in spot tonnage.
Consequently, charter rates began to
slip more quickly, with the New ConTex
showing a 6% drop month-on-month for
»normal« periods. Fixing levels for shorter
and flexible periods which are the order
of the day, are dropping even faster.
Big ships – big falls
Notably, large gearless vessels of
post-panamax dimensions are coming
under heavy pressure now. The latest reported
fixture was the 7,241 TEU »Adrian
Schulte« at 18,000 $/day for 4-6 months to
Global Feeder Shipping – down 30% on
market levels during February. Further,
another modern 6,900 TEU ship reportedly
accepted upper 17,000’s $/day for
2-3 months which was 10,000 $ less than
a sister had fixed in late February.
London broker Howe Robinson saw
charter rates for post-panamax ships
drop by a staggering 7.5-9.1% within just
one week. MSI predicts rate levels for
8,500 TEU and 6,500 TEU ships to fall to
12,500 $/day and 11,400 $/day by August
– half of what they were back in February.
Pressure on rates for these big vessels is
likely being compounded as carriers offer
their own ships as relets and as more
units return from scrubber installations
at shipyards, brokers warn.
For most of the classes below 5,000 TEU,
the downward trend has not been quite
as sharp. Baby panamax container ships
of 4,250 TEU capacity suffered a deterioration
from high 11,000’s $/ay to around
10,000 $/day in Asia over the past month.
Owners of gearless 2,700/2,800 TEU
ships – described by brokers as the most
active segment despite a rise in tonnage
availability – managed to limit losses to
around 500 $. Aker/Thyssen types were
still achieving around 9,000 $/day in Asia,
Hyundai Mipo types around 8,500 $/day
– all still comfortably above opex.
For the smaller handy types below
2,000 TEU, market conditions are deteriorating
rapidly now driven by tonnage redeliveries
in the Atlantic as well as in Asia.
Owners of modern economic 1,700 TEU
ships like the Topaz type are forced to
back-pedal, with fixing levels sliding below
10,000 $/day in Asia just after having
recovered to 10,500 $/day.
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8 HANSA – International Maritime Journal 05 | 2020