Posted on 03/14/2009 3:05:20 PM PDT by Vince Ferrer
LONDON -- Container ship charter owners are preparing to idle scores of vessels for extended periods over the coming weeks as hire rates reach new lows and ocean carriers press for steeper discounts to compensate for collapsing liner freight rates.
There were 392 box ships of 1.1 million TEUs, or 8.8 percent of the world fleet, without work in mid-February, according to AXS-Alphaliner, a Paris-based consultant that tracks laid-up tonnage.
But that figure “may yet even prove to be a conservative estimate,” says London shipbroker Clarkson.
Leading charter owners are laying up their ships because hire rates don’t cover vessel financing costs. Euroseas, the Nasdaq-listed box ship and bulk carrier owner, has already laid up one of its 10 container vessels and this week said it might be more economical to temporarily lay-up ships coming off hire rather than sign new charters that are likely to generate low revenue through 2009.
Earlier, Euroseas agreed to renegotiate two charters -- from $18,500 a day to $12,000 for a 1,742-TEU ship, and from $16,500 to $11,000 for a 1,932-TEU vessel. It also agreed to extend the charters at even lower daily rates of $10,000 for a year and $7,000 for six months, respectively.
Claus-Peter Offen, one of Germany’s biggest charter owners, plans to lay up around 10 vessels ranging between 1,200 and 2,500 TEUs. It has already laid up three ships that couldn’t find work after their charters expired.
Until now, charter owners and ocean carriers have opted for “hot” lay-ups where vessels are kept ready to resume trading very soon after a charter is fixed or freight rates and cargo demand pick up.
But an increasing number of owners are now mulling “cold” lay-ups, a more drastic step involving considerable expenditure in maintaining the idled vessel for a prolonged period and eventually returning it to trading.
The trend toward cold lay-ups reflects the steep slide in charter rates, and more recently, the shrinking demand from ocean carriers for tonnage as they axe services and lay-up their own vessels.
Average daily charter rates for a 1,700-TEU ship fell this week to $5,418, less than a third of the $17,905 it commanded in early May and a 2,500-TEU vessel is earning $6,940 a day, down from $25,074, according to the Hamburg Shipbrokers’ Association. Its closely watched ConTex index this week had fallen to 305 from 974 in early May.
Rates for larger vessels also are retreating, with the daily rate for a 3,500-TEU gearless Panamax ship down 44 percent in the past three months to $10,500 from $15,500, according to Clarkson.
But ocean freight rates have fallen even more, widening the gap with charter rates, particularly deals when carriers were competing for scarce tonnage to meet double-digit traffic growth. All-in rates from South China to Europe have plunged nearly 70 percent since November, according to London’s Drewry Shipping Consultants.
Ocean carriers have responded by announcing rate increases, mostly effective from April, and putting further pressure on charter owners to slash rates and accept clauses allowing them to break and renegotiate charters at short notice.
An increasing number of charter owners are opting for cold lay-up, but the majority are caving in to carriers’ demands in order to cover as much as possible of their ships’ financing and insurance costs.
But an increasing number of owners are now mulling “cold” lay-ups, a more drastic step involving considerable expenditure in maintaining the idled vessel for a prolonged period and eventually returning it to trading.
The trend toward cold lay-ups reflects the steep slide in charter rates, and more recently, the shrinking demand from ocean carriers for tonnage as they axe services and lay-up their own vessels.
Looks like they are forecasting an extended recession. Shipping companies once considered themselves recession proof, since all they had to do was reroute their ships from one sinking country to another, growing one. While the industry is cycllical, they never forecasted this.
I’ve sailed through the container port at Hong Kong on the way to Shekou.
You really don’t appreciate just how much cargo is being shipped out of China until you see something like that.
I just *had* to look up TEU to add to my vast store of useless trivia:
Container capacity is often expressed in twenty-foot equivalent units (TEU, or sometimes teu). An equivalent unit is a measure of containerized cargo capacity equal to one standard 20 ft (length) × 8 ft (width) container. As this is an approximate measure, the height of the box is not considered, for instance the 9 ft 6 in (2.9 m) High cube and the 4-ft 3-in (1.3 m) half height 20 ft (6.1 m) containers are also called one TEU. Similarly, the 45-ft (13.7 m) containers are also commonly designated as two TEU, although they are 45 and not 40 feet (12 m) long. Two TEU are equivalent to one forty-foot equivalent unit (FEU).
And this, boys and girls, is why the Chinese are PO’ed about our debt. We aren’t buying as much of their junk anymore.
Interesting article on here the other day about moving manufacturing back to the US because the supply chain is shorter, more flexible, less costly and US manufacturing can be more efficient.
ZERO and his union thugs will fix that but at least it may have been a possibility.
What it means to me as an intermodal trucker is not good. Not good at all. But as an American first and foremost it is GREAT NEWS! The Chinoisee sre troubled, but, the Chinoisee backed US dollar is in major trouble. Guess I better invest in a year or two’s supply of Quaker Oats, dried beef and ammo. Just damn!
I’ve never seen a container ship, so I found a picture in case anyone else is in my boat. The little pilot ship alongside is 105’ long. Boy, those container ships are huge!
http://www.boatingsf.com/photopage.php?photo=790
[*Sniff,* *Sob*]
In other words, they want more hundreds of billions of US dollars in “bailout” welfare from the United States to cover for their laziness and lack of self-discipline needed to save capital for future work.
a 20ft container's inside dimension (length) is between 19ft10in and 19ft8in. Let's be careful out there, everybody--don't go shipping stuff you can't fit in a box.
Well this proves one thing:The power of the American comsumer
We don’t buy and spend like crack whores and the world falls apart
The picture shows the economy of scale pretty well, and why ocean shipping is so economical. A crew of about 20 people can run a new container ship (11,000 TEU), while for interstate trucking, its 2 TEU per driver.
I skipped the stuff about container dimensions.
I figured that if you were going to actually be shipping stuff in a container, you’d do a little research first.
And there’s a limit to the things I can remember in my trivia memory space.
:-)
We might run perilously short of cheap toys, tennis shoes, and even those toxic food additives.
.
A TEU is a 20’ equivalent, according to Google, so does that mean those ships are 11,000 x 20 or 220,000 feet long?
I don’t think there is a word that describes that adequately. Just wow.
Now that is unintentionally hilarious. It is a serious situation.
Yep, that's what they look like. You can sit on the shore of San Francisco Bay and watch those go in and out all day long (I enjoy watching them when we go over to SF). Not too different from watching airplanes line up for takeoff and landing at a major airport.
We get a lot more things used commonly around the house on those ships.
Stock up.
Here’s an article about building houses from used shipping containers. I think it sounds neat.
http://www.bobvila.com/HowTo_Library/Building_a_Container_House-Building_Systems-A2413.html
Ship out all the jobs, and people don’t buy stuff. A lot of us have been pointing this out for years.
The landlord of the farm where I lived kept a couple as storage sheds, and they were surprisingly well-suited for the task.
Further indications that support at least portions of the portents of the significant BDI drop over the last twelve months.
A.A.C.
This is the Emma Maersk, the largest container ship, at 397 meters long. When viewing the pictures, people notice the stack of containers that is visible, but don't realize that below deck its just more containers. They are stacked up about 8-10 stories tall.
No, when the economy was humming along, you bitched about the trade deficit. Now, with the economy in the doldrums and the trade deficit improving, you’ve changed your tune.
Precursor to inflation, that ‘stock’ tip is right on, and Mr Øbama can get all the credit being it’s going to happen on his watch
Let me guess - you believe in Fair Trade*?
*Fair Trade = Open access to US markets while allowing other countries to put up as many trade barriers as possible because having both sides use the same rules would simply be wrong.
Now, with the trade deficit, unemployment, and the general state of the economy performing exactly as history predicts, the doomers are howling they were correct all along. The joke's on you, again.
Your question was so far out in left field that I couldn’t tell if you are joking.
U.S. Jan. trade gap narrows to 6-year low.All paleos/doomers/other experts are welcome to come and explain why this is great news.
It has been my experience that many who support Fair Trade believe than any sort of reciprocity in laws between - for example between the US and China.
Do you feel that the same rules should apple to all sides when it comes to trade?
“Here’s an article about building houses from used shipping containers. I think it sounds neat.”
I’ve thought about building with containers. Out here in Colorado where it’s dry I think it might even be possible to to bury a couple for a basement and weld more on top. You could be really creative.
“Problem is they’re too hot in the summer and too cold in the winter. And unless you have great skill with a blowtorch, no windows.”
Did you read the part of the article about the spray on insulation? I actually thought about building an earth sheltered home out of them. I think a plasma cutter would work better for cutting holes in them.
“I just *had* to look up TEU to add to my vast store of useless trivia”
Interesting! I didn’t know what a TEU was either. Thanks for the info. It will also add to my vast warehouse of wasteful knowledge. No one around me seems to be impressed. I might do OK on Jeopardy though!
I'm just trying to prepare you for the increase in the trade deficit when the economy turns back around. What will your excuse be then?
And pin the bailouts on the people who expect the government to coddle them . . . like your friends.
I’ve had bad experiences with spray-on insulation . . . just my opinion, but it doesn’t work as advertised. A buried or partially-buried container using the ground as insulation would work to the degree it is buried, but one would have to enjoy living in a cave.
It's because they load their definition of "free trade" with so much BS it's difficult to converse with them in English . . . they are speaking a different language. The U.S. has "free trade" agreements with maybe ten countries in the world (and China is not one of them).
What do you think we been trying to tell ya!
(But with all candor, I'd still like to get a pallet or two of cheap Chicom plinking ammo, but only 'cause US manufactures' are booked up for years)
BS. Moreover, who was shilling for a "living wage," restrictions on capital, other regulations, union labor, higher taxes, soaking the "rich," etc.? You did everything but send money to the DNC. And now you have the chutzpah to blame the Reagan supply-siders.
I’ve got a paleo on another thread scoffing at the notion of consumption altogether. It’s all paleo BS: complain that people buy stuff, and when they stop buying stuff, complain that they should.
The Chicoms could use a little extra biz right now.
A neutral observer would point out that you failed to answer the question.
I believe in "free" trade, defined as "you treat me the way I treat you." Hope that clears things up.
I don’t buy Chinese products, as a rule, but you are making a compelling case for Chinese ammo. Is it any good?
My question “Do you feel that the same rules should apple to all sides when it comes to trade?’ does not have free or fair in it.
As someone who was rather conservative once said.
Free and fair trade brings growth and opportunity and creates jobs.
Radio Address to the Nation on Free and Fair Trade
August 2, 1986
I didn’t understand the question you posed in your #25, and decided I’d avoid the term “fair” (as it was used there) altogether in order to avoid confusion.
What is your yes/no answer to ““Do you feel that the same rules should apple to all sides when it comes to trade?’”
It really isn’t that hard a question to answer - I am at a loss as to why you will not answer it.
My answer is “yes,” and I’m at a loss why you couldn’t take my #44 as the answer.
I remember when it was about nine cents a round - shipped to your door.....Sniff
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