When demand for cargo transportation falls, so do short-term rental rates for the ships that deliver that cargo. Lease rates climb as freight demand rises. This can be seen in spot rates for supertankers transporting crude oil from the Middle East and huge bulkers transporting iron ore to China (poor demand, low prices) as well as product carriers transporting diesel, gasoline, and jet fuel (high demand, high spot rates).
However, it is not visible in container shipping. Not yet, at any rate.
The container freight market is flooded with the negative sentiment about import demand, while short-term ship charter costs remain exorbitant.
“The charter market remains extraordinarily strong despite the negative attitude across the global shipping industry,” data source Alphaliner said on Wednesday. “Charter rates remain at historic highs, with certain sizes achieving some additional gains.” There is a “constant bonanza.”
Operators are still looking for ships.
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, according to Alphaliner.
It was also claimed that Sinotrans has chartered the 2,743-TEU X-Press Mekong, built-in 2021, for $149,000 per day for 40-45 days. “This rate… is not far from the historical high of $175,000 per day [for that size category] achieved in January,” Alphaliner added.
Even the tiniest ships — those with less than 1,000 TEU — “continue to generate astonishing rates.” Ships with a capacity of only 700-800 TEUs are employed at a daily rate of $20,000-$30,000. SITC recently chartered the 724-TEU Atlantic Pioneer, built-in 2008, for $30,000 per day.
Why is there such a difference between the charter and freight markets? Freight rates are down from their highs and continue to fall, but they remain exceedingly high – high enough for ship operators to profit even if they continue to pay exorbitant charter costs.
“The sustained reduction in spot prices on most key routes is undoubtedly a concern,” Alphaliner writes, “but they remain at historical highs, for the time being, giving both NOOs [non-operating owners, the corporations that lease ships to liners] and charterers confidence in short-term market prospects.”
“The short term remains promising,” according to NOOs.
Moreover, despite medium- and long-term concerns about increased capacity due to new ship deliveries in 2023-25, multi-year charters are still being signed at extremely attractive rates. According to Alphaliner, ocean carrier Zim (NYSE: ZIM) has just hired the 4,520-TEU sister ships Seaspan Chiba and Seaspan Kobe for five years at $43,000 a day.
There hasn’t been a drop in charter rates yet.
Data from charter rate tracking businesses do not show a market collapse. On the contrary, it depicts a market that is holding at or around its peak.
The Harpex index is published by the brokerage Harper Peterson & Co. The index (which covers 700- to 8,500-TEU ships) peaked in mid-March, fell slightly in April, remained stable in May, then began climbing again this month. The Harpex is currently down 3% from its peak, but it is still more than double what it was at this time last year.
Alphaliner monitors typical rates throughout time and estimates rates for 12-month charters. (Because of the scarcity of available ships for rent and the rarity of 12-month arrangements, these figures are simply estimates.)
It presently assesses rates for 8,500-TEU container vessels at $150,000 per day, barely below the $155,000-per-day record set from late March to mid-April. The current rate has increased by 114% year on year (y/y).
Rates for 5,600-TEU ships start at $130,000 per day. That’s an all-time high and an increase of 110 percent year on year. It values 4,000-TEU ships at $110,000 per day, an all-time high and an increase of 93 percent year on year, 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 an increase of 105 percent year on year.
One-year rates for 1,700-TEU ships are $58,000 per day, close to the all-time high of $62,500 per day from late February to mid-May and up 71 percent year on year, according to Alphaliner. It forecasts charter prices for 1,000-TEU container ships at $32,000 per day, down 36 percent from a brief high of $50,000 per day in early March, but still up 68 percent year on year.
