Ship chartering rates fall continuously and agreed periods are getting shorter
None of the major charterers are currently willing to seal multi-year commitments.
Apart from the series of recently concluded forward contracts in the larger segments, the container charter market continues to experience very little activity. This is partly due to the continuing shortage of vessels. However, demand is also becoming a problem, as most major shipping lines refuse to charter more ships, especially the fastest units, in a context plagued by falling cargo demand. In this sense, the return of spot capacity, although limited at this stage, is a sign that the market is running out, reports Alphaliner.
This downward momentum translates into continuously smoothing charter rates and shorter and shorter periods of employment.
With the exception of one shipping line, none of the major charterers is currently prepared to embark on multi-year capacity commitments. The maximum that can be obtained is usually 12 months, compared to up to 60 months at the peak of the market. Even high-paying short-term jobs have become more difficult to develop, unless in terms of discount, as demand for spot shipments declines.
Meanwhile, charter rates continue to weaken in all areas, but remain healthy for most ship segments and are expected to remain strong in the short term, due to a continuous limited supply of tonnage and persistent disruptions in the global logistics chain.
On the front of the load, the news is bleak with spot rates falling at an accelerated pace. The SCFI (Shanghai Containerized Freight Index ) which fell to 2,848 points on September 2, is 10% below its previous week level and 45% below its historic January peak.
This development is of particular concern for shipping lines with increased exposure to spot loads.
However, most shipping lines now recognize that, while 2022 will be a record year, rough waters are expected from 2023 onwards, due to a combination of weaker cargo demand and massive influx of new capacity under construction.
These developments will also inevitably affect the ship chartering market, with lower expected capacity demand for NOO (non-operator owners) and increasing pressure on charter rates.
Overview by main segments
The Handy VLCS segment (7,500-11,000 TEUs) remains quiet, due to a continuous shortage of fast ships and limited demand. The last agreements concluded saw a series of units of 10,000 TEUs assuring long-term charters of six to eight years from 2024 to US$35,000/day. There is a continued interest of modern shipping lines, so more contracts in this segment can be expected in the coming months.
Two Panamax Classics of 4,250-4,300 TEUs have extended their contracts for periods of 18 months from April June 2023 at an undisclosed rate. This agreement highlights the reluctance of charterers to embark on multi-year contracts and departs from the typical 36-month agreements concluded until recently. The reference rate for 36-month charters has so far been US$47,500/day, and the shorter periods are generally agreed to be higher. Meanwhile, on the supply front, two ships of 4,380 TEUs controlled by Greece remain in spot position in Asia.
No vessel charters of 2,700-2,900 TEUs were made in the last fortnight, indicating that the segment remains exhausted. The latest agreements for standard capacity of 2,700 TEUs were concluded at US$80,000/day for short periods and US$58,500/day for 24 months, figures unlikely to be reached in the current market.