Containerships Astonishing rates drive boxship boom This time last year, a 1,700 teu geared feeder containership would typically have been fixed on a 6-12 month timecharter at about US$10,500 a day. Since then, rates have soared and the same vessel would now be earning more than $75,000 on the same basis. This rate itself is up by about 80% on the $40,000 that the same ship would typically have earned in July, just one month earlier. In the large categories, the rate rises have been less dramatic but still, in relative terms, quite astonishing. A gearless 6,600 teu vessel, according to Clarkson statistics, might have earned an average of just over $21,500 a day on a charter of 6-12 months last year. By this August, however, such a vessel could well have been earning close to $110,000 a day. Analysts’ predictions during the final days of August indicated that this was not merely a bubble, but was likely to be a sustained spell of high earnings, with limited access to additional tonnage and charterers holding on to capacity whenever possible. The buoyant market could well extend well beyond the final quarter of the year and well into 2022, was the general consensus.
Buck the system – fix your own Such was the scale of the rate escalation that some shippers took matters into their own hands, attempting to reduce their exposure to established liner sailings and fix their own tonnage for point-to-point shipments. But, to some extent, they were also subject to the widespread port disruption and equipment imbalances that were hindering the mainhaul container lines. Terminals in China were operating at reduced capacity with the country’s strict COVID-19 Delta variant policy forcing the closure of the Meishan Island International Container Terminal in Ningbo-Zhoushan Port from August 11th, only reopening 14 days later. The move was in response to a single worker being infected with the Delta variant. However, the extent of the resulting disruption that resulted was such that some of the world’s most important supply lines were affected. Leading container lines pursued urgent strategies to limit the impact of the Meishan Island terminal closure, only to find that worsening congestion at
The Meishan Island International Container Terminal, which was closed for some 14 days
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By Paul Bartlett
other ports in the region was causing further disruption. The problem was made worse by the fact that the so-called ‘peak season’ is just beginning – the time when east-west and trans-Pacific container trade volumes hit their highest levels out of Asia in the months leading up to Christmas in Europe and the US.
Supply chains overwhelmed Lengthy delays were inevitable. Meanwhile, at ports on the US west coast and some container facilities in Europe, severe delays were also evident. Ship tracking sites reported large numbers of containerships anchored off ports including Los Angeles and Long Beach in Southern California, with close to 40 vessels waiting for berths at one stage. And maritime authorities took a dim view of congestion charges introduced by major container lines on top of the sky-high freight rates they were already charging. Early in August, the US Federal Maritime Commission (FMS) launched what it called an Expedited Inquiry into the activities of eight container lines relating to congestion or related surcharges. The carriers – CMA CGM, Hapag-Lloyd, HMM, Matson, MSC, OOCL, SM Line and Zim – were all given until the middle of the month to respond. However, even with the prevailing high freight rates, carriers with ships caught by port congestion suffer huge losses from their ships lying idle. In financing costs alone, without insurance, drydockings or other daily operating expenses, large containerships cost $20-30,000 a day to fund, before they carry anything. It may be difficult to see an immediate upside for ship repairers from this troubled backdrop. But the buoyant market is likely to lead to a range of projects across the container fleet. These are likely to include life extension and additional surveys on small, elderly feeders, more regulation-related modifications, and possible upgrades linked to IMO ship productivity and carbon intensity parameters.
Insurers increasingly twitchy as incidents ramp up It’s no surprise that this year’s analysis of ship casualties from Munichbased insurer, Allianz, focuses closely on the impact of the pandemic on ship safety now and in the future. As the insurance company’s Captain Nitin Chopra, Senior Marine Risk Consultant, put it, “Timely crew changes are vital to the safe operation of shipping, and seafarers spending extended periods on-board are more at risk of mental health issues, exhaustion, fatigue, anxiety and mental stress.” At a more general level, the insurer noted that rapidly rising demand for shipping services, particularly in the container and dry bulk sectors, is putting more pressure on shipyards. “There is an increased cost of hull and machinery claims due to delays in the manufacture and delivery of spare parts, as well as a squeeze on available shipyard space,” Allianz said. It also warned that the cost of salvage and repairs is rising and there could be a risk of more machinery breakdowns if the pandemic has affected the ability of ships’ crews to carry out maintenance procedures effectively, or follow manufacturers’ protocols.
