Mid-sized boxships are under pressure

Charter rates for medium-sized containerships remain under pressure, with earnings eroded by up to 15% over the past couple of months.

Demand for ships in the 1,500 teu to 2,000 teu sizes has fallen away, with brokers reporting some owners halving their short-term rates in order to secure employment over the holidays. And in the longer term it is these ships that are particularly vulnerable to a market downturn, according to some analysts.

The latest report from Paris broker Barry Rogliano Salles draws attention to the wave of newbuilding orders for ships of 2,500-3,000 teu in the past six months. It notes these are likely to replace 1,700 teu tonnage in the feeder trades within three years.

The 1,700 teu ships are a central feature of the charter markets, but could find themselves surplus as the world’s container trades shift to higher size categories in support of the of 8,000 teu tonnage now in the pipeline.

Latest estimates from Barry Rogliano Salles put fleet growth at an average of 10.6% over the next three years. But over the same period, the fleet of ships over 7,000 teu is forecast to grow at an annual rate of almost 60%, to stand at 1.1m teu at the beginning of 2007 out of a total cellular fleet of just under 9m teu.

“Given the schedule of deliveries, the size of the fleet will enter the ‘danger zone’ in the second half of 2005, and 2006 could be a year of low charter rates,” it predicts.

More immediately, Howe Robinson is reporting another small dip in the market, with its index marked down again for the eighth consecutive week. However, yesterday’s drop was only 0.8 points to 1085.2, with most components remaining unchanged and only medium-sized tonnage again lower.

And as Howe Robinson points out, rates for larger ships may have plateaued but are still at historic highs.

Meanwhile, traditional rivalry between the container and conventional reefer trades has intensified, with Maersk Sealand fixing about a third of Argentina’s expected deciduous crop.

The container lines have been threatening to grab a larger share for some time, Oslo brokers Orion Shipping points out, with local exporters welcoming competition after last season’s jump in freight rates for conventional produce cargoes. Hamburg Süd and CSAV are also offering containerised reefer services from Argentina.

Janet Porter, Lloyd's List