The momentum remains positive from an improvement in freight rates during the second quarter of the year, while there are still concerns on the overcapacity with hopes from an increased demolition activity in the period January-May. The newbuilding activity remains low from the previous high volumes of 2011 and 2010, while the low newbuilding prices still tempt owners for the placement of new boxships in the post panamax segment.
The week ended with a rise in the Shanghai Container Freight with a remarkable rise in the main trade from Shanghai to base ports of Europe and in the secondary trading route from Shanghai to Australia (Melbourne). The Shanghai Container Freight Index ended on Friday 29th June at 1460, up by 2% from previous week’s closing at 1425, while is up by 54% from the end of December 2011, when it was at 948.
On a weekly basis, rates on Asia-Europe and Asia-Mediterranean routes have shown an increase by 22% and 12% respectively by rising to $1888/TEU and $1892/TEU respectively, from $1549/TEU on Asia – Europe and $1685/TEU on Asia-Mediterranean. Rates on the Asia-Europe route are now 166% higher than this year’s lowest level on February 17th, when they were at $711/TEU and 3% down from this year’s peak of $1934/TEU on May 4th. The same outstanding increases have been also noted in the rates of Asia-Mediterranean by recording a 158% upward movement from this year’s bottom low of $735/TEU on February 17th and 7% down from this year’s peak of $2033/TEU on May 4th.
In transpacific routes, Asia-USWC and Asia-USEC, spot rates plus surcharges have posed softness, but they are still firm by standing 26% and 17% respectively above from the end of the first quarter. On a weekly basis, rates on Asia-USWC are now at $2571/FEU, 4% down from $2678/FEU on Friday 22ND June, while rates on Asia-USEC are at $3752/FEU, down by 1% from $2678/FEU. On December 9th 2011, rates on Asia-USWC route were 45% lower than today’s levels by standing at $1419/FEU and on Asia-USEC were at $2524/FEU, down by 29%.
On secondary trading routes, rates in Asia-Persian Gulf (Dubai) have shown the biggest improvement during the second quarter of the year by standing at $1186/TEU, down by 15% from previous week’s closing of $1395/TEU, but they are 93% above from $614/TEU on February 17th. Rates in Asia-Australia have shown the biggest increase this week among the other secondary trading routes by moving 30% above and closing $968/TEU from $746/TEU last Friday, while they are 33% above from $730/TEU on February 17th. Rates in Asia-East West Africa Lagos ended at $2177/TEU, down by 3% week-on-week from $2248/TEU, while they are 8% up from the low of $2013/TEU on February 17th. Rates on Asia-South Africa have lost $4/TEU from last week’s closing by standing at $1100/TEU, while they have shown a 10% increase from $999/TEU on February 17th. Rates on Asia-South America have risen to $1979/TEU from $1987/TEU last week by standing 41% above from $1403/TEU on February 17th.
Rates in Intra Asian routes continue their moderate performance with Asia-Taiwan experiencing the biggest weekly decline of 10% by falling to $269/TEU from $298/TEU last week and standing at similar levels of the closing of February 17th at $265/TEU. Rates in Asia-West and Asia-East Japan are now at $348/TEU and $347/TEU respectively, from $318/TEU on February 17th. Rates in Asia-Korea and Asia-Hong Kong showed no weekly change by closing at $176/TEU and $135/TEU respectively, while rates in Asia-South East Asia (Singapore) fell to $270/TEU from $274/TEU last week.
While the spot freight market sentiment has improved, S&P downgraded French container line CMA CGM to CCC+ from B, citing vulnerability to default following deterioration in liquidity.
The average value of SCFI for the second quarter of the year shows an increase by 35% from the previous quarter with liners’ profitability being restored as demand for containerships reduces the size of the idle fleet. According to Alphaliner figures, the laid up tonnage has fallen to 438,000 TEU or 3% of the total existing fleet, the lowest in seven months, while the containership orderbook has dropped to 23% of the global fleet from 60% in the first quarter of 2008. Only nine boxships of over 5,000 TEU are estimated to be idle, from 50 in March, while there is still a large number of a smaller vessel size that remains laid up, over 100 ships in the range of 1,000TEU-3,000TEU are without employment. The noteworthy is that larger vessels above 7,500 TEU are all employed with only two being idle in this category that are shortly will join in the active fleet.
The recent upward movement of spot market is not yet secured for the long term as the issue of overcapacity seems not to have been resolved despite the slower growth of fleet, as per data from Alphaliner shows the global containership fleet had passed the 16m TEU mark last week with 772,000 TEU delivered so far in the first six months of the year and a further 30,000 TEU this week. The capacity delivered during this semester represents 5.0% of the global cellular fleet at the beginning of the year. Alphaniler also commented that it has taken the fleet 12 months to climb from 15 to 16mTEU, while it took nine months to climb from 14 to 15mTEU and nine months to climb from 13 to 14mTEU. The slower rate of fleet growth could be explained by the increased scrapping activity with 89 ships aggregating 163,000 TEU being delivered so far to breakers or decommissioned during the first six months of the year, compared to total deletions of 107,000TEU for the whole of 2011. Despite the high scrapping level, the capacity removed remains only a fraction of the new vessel deliveries with a further 670,000 TEU due to be delivered in the second half of 2012, posing a significant challenge for an industry that is still suffering from excess supply and estimations for lower scrapping removals due to recent drop of scrap price levels.
Under the current market fundamentals, Taiwanese carrier Yang Ming Marine Transport plans to order five ultra large boxships of 14,000 TEU-16,000 TEU by the end of this year. Yang Ming has yet to decide how will finance the order and it plans to raise $T8bn ($267.9m) from sales of convertible bonds to build working capital that could limit its requirement to borrow. On the other hand, Evergreen’s order for 10 13,800 TEU boxship units is in doubt as owner is said to have been unable to raise financing. The order has been placed by Korea Infrastructure Investments Asset Management Co. to be chartered to Evergreen for 10 years at around $50,000/day with a purchase option on the vessels at the end of the charter. In the large panamax segment, London based Zodiac Maritime Agencies is said to have finalized a 10 boxships order of 5,000 TEU at STX Offshore & Shipbuilding Chinese facility in Dalian at the price of $40mil each for delivery in early 2014. However, market sources suggest that the contract price may be even lower in the region of $40mil each and Zodiac has penned a letter of intent for five plus five 5,000 TEU boxships.
APL, the container shipping unit of Singapore’s Neptune Orient Lines (NOL), has taken delivery of the 10,700-TEU APL Salalah, built by South Korea’s Daewoo Shipbuilding, and is the second vessel in a series of six ordered in June 2007. In addition, BOX SHIPS, the New York-listed, Athens-based start-up that specialises in container feeder vessels, has taken delivery of its eighth vessel, the 5,344-TEU OOCL Hong Kong under a 36-month charter at US$26,465, daily rate to Hong Kong’s Orient Overseas Shipping Company.
Source: Maria Bertzeletou, Hellenic Shipping News Worldwide