Container ship charter rates eclipse previous records as tonnage market surge intensifies
8,500 TEU ship charters jump 330% year on year
Multi-year charters are now the norm
Few 2021-2022 new build deliveries support carrier pricing power
While the global containerized freight markets are hot, dry tonnage pools are driving liners to pay increasingly higher prices for all available charters.
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After hitting multi-year lows in June 2020, due to the bleak outlook for carriers and the premature return of chartered vessels in the face of demand destruction caused by the coronavirus pandemic, container ship charter rates have reached new all-time highs, Petersen & Co data showed.
On-time charter rates for a vessel with a capacity of 8,500 twenty-foot equivalent units registered at $ 65,000 / d on June 4, a jump of more than 330% compared to the estimate of one year ago. $ 15,000 / day year.
A similar story unfolded on the freight rate side. General tariff increases every two weeks resulted in an upward trend in global tariffs before strong fundamentals spilled over into the tonnage market. The Platts Container Freight Index, a weighted average of Platts’ global valuations, was valued on June 5, 2020 at $ 1,141 / FEU, and has since seen near-weekly increases.
On June 4, 2021, the index was valued at $ 5,559 / FEU, an increase of just under 387%.
And sources expect further increases as carriers desperate for additional capacity attempt to outbid each other on price and lease length.
“It’s hard to see anything change in the coming weeks as the pool of free charter tonnage is shrinking further and everything that comes into the market drives prices up significantly,” the shipping broker said. Londoner Braemar ACM on May 25.
The lowest valuation for the 8,500 TEU vessel band was $ 12,500 / d on June 12, 2020, as a booming charter market pressured rates. But as global demand for containerized cargo began to increase in the second half of the year, charter activity quickly picked up with carriers looking to meet demand.
Since the low of June 12, 2020, charter rates for 8,500 TEU vessels have grown on average by about 3.4% per week, but have reached up to 14.3% growth week to week. the other at the end of June.
Tonnage suppliers call for a strong market until 2021
“The low number of vessels available coupled with the desperation of carriers to secure tonnage, means that the latter has shown willingness to accept ever more onerous demands from tonnage suppliers,” maritime group BIMCO said on June 2.
And many charter agreements have been extended well beyond the historic norm of six to 12 month agreements, with most now set on a multi-year basis. The lengthening of the term of charter contracts could indicate a shift in favor of ocean liners, as high freight rates are likely to be maintained to offset charter costs.
“The strong momentum in the container market, which started in the second half of 2020, has shown no sign of slowing down, but instead has steadily strengthened in 2021,” said Constantin Baack, CEO of MPC Containerships, a supplier of tonnage based in Norway. “Charter rates are at historically high levels [while] charter periods are getting longer. . . so far, in 2021, we have concluded 26 multi-year charters. “
Large order book, but few deliveries 2021-2022
A flurry of new construction orders in the first half of 2021 pushed the order book to levels not seen since 2014.
“During [first-quarter] 2021, we estimate that 180 vessels with a total capacity of 1.9 million TEUs have been ordered. The highest total quarterly orders ever in terms of contracted capacity, ”Braemar ACM said at the company’s first quarter briefing.
However, deliveries from 2021 to 2022 are expected to provide only marginal growth in global fleet capacity, leaving shippers with negative sentiment about easing freight rates.
“With the majority of the newly ordered tonnage slated for delivery in 2023, fleet growth is expected to slow down next year before returning sharply in 2023 when we are already expecting a delivery of 1.5 [million] EVP, ”said BIMCO.
As orders for new builds continue, delivery dates are pushed back into the future as Asian shipbuilders reach full capacity. Ships ordered in the second quarter of 2021 have been expected to arrive online through 2025, sources say.
According to Braemar ACM, 36 Ultra Large Container Ships are expected to be delivered in 2021, representing a capacity of 653,600 TEUs. In 2022, 39 ULCS are expected to come online, with a combined capacity of 675,354 TEUs. This increases to 75 ULCS deliveries expected in 2023, showing a load capacity of over 1.33 million TEUs.
In 2023, the global container ship fleet is expected to grow by 6-7%, an eight-year high.