Posted on 06/03/2021 12:39:15 PM PDT by blam
Record charter rate highlights extreme vessel shortage — a major negative for cargo shippers
In a sign of just how frenzied the container market has become, a freight forwarder is reportedly paying $135,000 per day for a short-term charter of the S Santiago, a 15-year-old container ship with a capacity of 5,060 twenty-foot equivalent units (TEUs).
“Charter rates for short employment … have gone out of control,” said Alphaliner in its new weekly report.
“Depending on the sources, the ship would have obtained anything between $100,000 and $145,000 per day, an absolute historic high. The name of the charterer has not been fully confirmed, although it is believed to be a forwarder.”
An industry source speaking to American Shipper on condition of anonymity said the rate was $135,000 per day, the duration was 45-90 days (one round voyage with an option for a second) and the charterer was Chinese freight forwarder 3 Seas.
The source said that there is “more and more enquiry every day” with “people panicking now” amid “unprecedented times.”
Alphaliner said that “this colossal rate is substantially higher than the already whopping $70,000-$90,000 per day — depending on the final duration — agreed recently by Hapag-Lloyd for a two- to three-month employment of the 4,308-TEU CMA CGM Opal.”
The industry source told American Shipper that the S Santiago deal was concluded last week and that he wouldn’t be surprised if a new record were reached this week.
According to U.K.-based valuation and data provider VesselsValue, the 2006-built S Santiago is owned by Cyprus Sea Lines and is currently valued at $38.48 million.
To put the enormity of the charter deal in perspective, the shipowner will earn back one-sixth of the ship’s value in a single voyage — and one-third of the vessel’s value if the charterer takes the option for the second voyage.
What this means for cargo shippers
The historic S Santiago transaction is yet another big red flag for cargo shippers. Charter rates like this only make sense if freight rates are high enough for the charterer to turn a profit.
It also underscores just how tight vessel supply is.
Alphaliner reported that only 2.7% of the global container fleet was inactive as of May 24, totaling 660,662 TEUs. Of that, 70% (461,779 TEUs) was inactive due to ships being in the yards for repairs or maintenance.
And cargo shippers will not be getting any relief in the near or medium term from newbuild deliveries.
There has been a surge of orders recently, but those are for 2023-2024 deliveries. Clarksons Research Services estimates that fleet growth in 2022 will fall to 2.5% from 4.6% this year.
What this means for ship lessors
The S Santiago rate was so high because ship lessors, otherwise known as non-operating owners (NOOs), much prefer to put their tonnage on multiyear charters and lock in long-term profits.
“Those electing to accept short-term charters are likely doing so to capture fantasy rates near term,” said Fearnley Securities, referring to the “off the charts” S Santiago transaction.
According to Alphaliner, “The market has become one of long-term charters, with 43 of the 51 fixtures reported in the past two weeks concluded for durations of 24 months or over.” Of that total, three charters were for five years’ duration, nine were for four years, 10 for three years and the remainder for two years.
“The medium-term prospects remain bright for NOOs,” affirmed Alphaliner.
Listed NOOs include Costamare (NYSE: CMRE), Danaos Corp. (NYSE: DAC), Seaspan owner Atlas Corp. (NYSE: ATCO), Global Ship Lease (NYSE: GSL), Navios Partners (NYSE: NMM), Euroseas (NASDAQ: ESEA), Capital Product Partners (NASDAQ: CPLP) and MPC Containers (Oslo: MPCC).
What this means for liners
The record-setting charter market implies medium-term downside risk for liner companies.
Today’s unprecedented freight income more than offsets stratospheric charter costs, but NOOs are forcing liner operators to accept longer durations to get the ships. If freight rates were to fall significantly by 2023-24, charter rates negotiated in 2021 will be much more painful to liners’ bottom lines.
ZIM (NYSE: ZIM) offers the most extreme example, because unlike other liners, it charters its entire fleet and does not own vessels.
As of Sept. 30, 2020, 71% of its capacity was chartered for a year or less. The company touted the advantage in its IPO prospectus, stating, “Short-term charter arrangements allow us to adjust our capacity quickly in anticipation of, or in response to, changing market conditions.”
But as ZIM has rapidly increased its fleet size to capture freight-rate upside, charter durations have ballooned. Its fleet size nearly doubled from 59 vessels in mid-May 2020 to 110 as of mid-May 2021.
According to Alphaliner, charters by ZIM over the past month include the 6,648-TEU Kobe for 44-48 months at $45,000 per day; an extension of its charter of the 9,784-TEU Santa Linea for 40 months at $42,500 per day starting in Q1 2022; and an extension of its charter of the 3,534-TEU Bach for 36-38 months at $31,250 per day.
During the latest quarterly conference call, ZIM CFO Xavier Destriau conceded a shift to longer durations out of necessity.
“We will continue to bring in vessels in order to capture [revenue] from new lines we are opening and to renew existing charters,” said Destriau. “We are not changing our strategy, which is to continue to rely on the charter market. What is changing is the allocation of short-term charters versus long-term charters due to the current market conditions, obviously.”
If you know what you want for Christmas and see it, buy it now.
https://ycharts.com/indicators/container_shipping_rate_for_1100_teu_vessels
Container Shipping Rate for 1100 TEU Vessels
17000.00 USD for Wk of May 28 2021
Value from 1 Year Ago 5500.00
Change from 1 Year Ago 209.1%
Frequency Weekly
I do know but sadly freedom does not come by ship nor Fed X.
Paging Ragnar Danneskjold....
Source :
https://tradingeconomics.com/commodity/baltic
"Baltic Dry increased 1,230 points or 90.04% since the beginning of 2021, according to trading on a contract for difference (CFD)
that tracks the benchmark market for this commodity.
Historically, Baltic Exchange Dry Index reached an all time high of 11793 in May of 2008."
Container ships costs rising? Or the dollar swirling the toilet?
griswold3 :" Value from 1 Year Ago 5500.00
Change from 1 Year Ago 209.1%
Frequency Weekly
Wasn't the previous "high rate" of May 2008 at 11793,
somewhere around the great fuel shortage of 2008 ?
I am in a business that relies on transport. Unfortunately, most of the “American” companies outsource their stuff to Asia, repack it and slap a USA label on it. Prices for a containers out of China is running close to $5000 per. Which is up 400% from a year ago. They are running out of containers. Seriously.
We don’t make enough stuff here to ship them back. It’s not worth it to them to ship empty containers back - at least not yet. So we have 100’s of miles of containers just sitting around. Maybe they’d make decent housing for the homeless.
Dockworkers are playing the teacher’s union game. Social distance. Half staff. Dozens of ships are docked off ports waiting to be unloaded. Slowdown. (quo ELO soundtrack). They want more concessions. Like teachers unions.
If you are in export business, you can get a good deal. If you want to import, you gotta wait. Priority goes to high margin goods who can afford to pay to jump the line.
iPhones, TVs, gaming consoles. They get shipped promptly
Commodities and input materials for domestic manufacturers, cheap stuff, just wait. It’ll arrive before 2023. And cost you 20%-30% more. But it’s coming.
What the hell happened to all of those ships that were sitting at anchor off Singapore?
Sitting off the coast of LA and Long Beach?
Guy I know here in town bought a bunch of empties. He setup a storage business on a vacant lot he owned, and sells extra containers to the public. He's doing really well right now.
Shipping container homes are all the rage with the millennials right now. I have two friends that are building homes with them they are booked solid until this time next year. I’m thinking of digging up space for one or two and covering them with dirt so as to have an underground man cave set up.
Just don’t put the dirt on the container itself! Them bad boys been known to buckle under dirt. I’d drop a few several feet underground, encased in a concrete barrier/box, with walls say, 3 - 4 foot thick? Maybe a nice ventilation system? :D
When COVID first hit, the Baltic Dry Index was...just a couple of % of what it had been before the crisis.
I wanted to back up the truck, but they halted trading, so I forgot about it.
By June or July, they resumed trading at $300/share; it was still a 4-bagger after that, but I’d forgotten about it.
If I could have bought the amount I wanted when Covid hit, I’d have been retired right now.
Ruckert Terminals in Baltimore put out a letter last week stating they are not accepting ANY new inbound shipments in the month of June. This is one of the largest break bulk facilities on the east coast.
In addition, we are hearing that Cape Canaveral is full to capacity with lumber right now.
My company ships 40’ containers of lumber from northern Europe to the US. Container costs and boat space has tripled in the last 6 months.
“Container ships costs rising? Or the dollar swirling the toilet?”
Read the article ...
Beat inflation by outrunning it:
Nordic Atlantic Tankers
Just one example of many. It’s volatile so requires strong stomach. Dividend around 10% and owners recently were buying their own stock.
dint they send a crapload of them to the breakers over the last few years?
or was that super tankers
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