[190121.EN.SEA] Never Have Carriers Had It So Good: Maritime Strategies International

 

SPOT freight and time charter rates in the fourth quarter have hit levels not experienced in more than 10 years driven by a tight containership market, a box shortage of a ramp-up in restocking and a surprising resilient consumer demand, reports London's Riviera Maritime Media.

In its December containership report, London-based Maritime Strategies International (MSI) put time charter assessments for 8,500-TEU vessels at US$36,000 per day, and $42,000/day for 'eco' 9,000-TEU units, while 4,300-TEU box ships earnings rose to $24,000/day compared to a low of $7,000/day in June, and 6,500-TEU vessels surpassed $30,000/day.

The rate surge was an about-face from the first half of 2020 when Covid-19 dragged down demand, noted the MSI study.

MSI expects the earnings environment to persist through to February 2021 - the end of the Lunar New Year holidays in China, as retailers in Europe and the US look to replenish their inventories.

It will be interesting to see the final tally on Q4 2020 earnings of container shipping lines, after a blowout Q3 2020 performance in which they had net earnings of $5.054 billion - a more than fourfold increase year on year, according to an analysis by Blue Alpha Capital founder John D McCown. Net earnings for the same 11 major container shipping lines for Q3 2019 were $1.187 billion

One-time chairman and chief executive of Jones Act container vessel line Trailer Bridge, Mr McCown said: "This was the best quarterly performance by the container shipping industry since before the financial crisis more than a dozen years ago."

With rates increasing threefold for 8,500-TEU container ships, there was a knock-on effect on ship valuations. Valuations for large five-year-old container ships - 18,000-TEU and 13,000-TEU units - recovered from their historic lows in June 2020, increasing in value by 18 per cent in Q4 200, according to VesselsValue.

In its Shipping Market Review, Danish Ship Finance points out that fuel and technology considerations kept investors from ordering new vessels over the last two years, and the coronavirus "seems to have amplified this trend." As of September 2020, only 30 vessels totalling 177,434 TEU were ordered, corresponding to 0.8 per cent of the fleet, down from four per cent in 2019.

"Newbuilding contracts, albeit being few, show Chinese owners placing orders at Chinese yards. The orderbook amounts to 2.1 milliion TEU, equal to nine per cent of the fleet - the lowest level in decades. Of this, 65 per cent is scheduled to be delivered by mid-2021."

While prudent ordering will most likely continue in the containership sector, LNG-fuelled tonnage will continue to grow.

French shipping giant CMA CGM added the world's largest LNG-fuelled ship in 2020, 23,000-TEU CMA CGM Jacques Saade, and is committed to having a fleet of 26 LNG-fuelled container ships by 2022.

With its $35 million retrofit of the ultra-large containership (ULCS) Sajir to LNG propulsion underway - due for completion in early 2021 - Hapag-Lloyd has inked a letter of intent with Daewoo Shipbuilding & Marine Engineering to build six, with options for six others. If all 12 box ships are confirmed, Hapag-Lloyd would invest an estimated $2 billion in LNG-fuelled box ships.

Source : HKSG.