Weak trade routes, more service cut grow volumes of redundant ship

Continued weakness on the Asia-Europe, Asia-Latin America and Asia-West Africa trade routes, which has resulted to more service cut by shipping liners, have left container lines with a growing number of redundant ships.

Alphaliner report has it that the number of idled global container capacity reached a record high of 1.57 million twenty equivalent units (TEUs), while the one-third of the laid-up tonnage consisted unemployed containerships of 7,500-19,000 (TEU).

The 352 laid-up ships, as of 11 March, account for 7.8 percent of the global container vessel fleet –a number expected to grow with 1.25million TEU of capacity scheduled for delivery this year.

After deductions for vessel scrapping, Alphaliner calculates that the new buildings will add a full-year fleet growth of 4.3 percent. This compares with estimated demand growth of just 1.8 percent. Alphaliner further stated that about 30 ships of 9,000-14,000 TEU had become surplus following the axing of a series of Asia-North Europe loops by the four east-west alliance groups, with the latest network rationalisation recently announced by the CKYHE alliance.

Also, ocean carriers look first to see if they can cascade surplus ships onto other trades while off-hiring any chartered smaller tonnage deployed on smaller routes as early as possible. “Carriers are starting to shift their surplus ships out of these (weak) sectors, creating havoc on other trades,” said Alphaliner.

Unsurprisingly, the overcapacity crisis has put further pressure on charter rates and obliged containership owners to instruct brokers to be flexible with terms and conditions, including offering free positioning.

And according to London-headquartered shipbroker Braemar ACM, few ocean carriers are prepared to put any firm periods on charters in sectors where there is an abundant choice of ships. It said that “flexi-period” terms, with only the daily hire fixed was now normal with most liner companies. The charter market is experiencing “further misery”, said Alphaliner, and would “remain in the doldrums” as long as the supply-demand gap remained.

Meanwhile, recent fixtures reveal how far charter rates for larger vessels have dropped. Hapag-Lloyd was recorded fixing an 8,000 TEU ship recently for two months trading between Asia and the west coast of South America at just $8,000 per day with flexible options.

While the overcapacity crisis in the larger sizes is continuing to drag down daily hire rates to new lows, the dearth of new-builds in recent years of the feeder sizes has kept the sector relatively healthy, providing a silver lining for hard-pressed containership owners.

Also, Hamburg Sud recently fixed a 1,100 TEU ship for 16-18 months to deploy on its US west coast to South Pacific service at $9,600 per day.