Reality Bites As Box Ship Rates Slide to Historic Lows

CONTAINERSHIP charter rates have sunk to all-time lows in real terms as the relentless stream of bad news continues, writes Janet Porter.
With lines continuing to axe services, it is the tramp owners that are bearing the full brunt of the slump. Even Mediterranean Shipping Co, which has been keeping its service network intact, has now decided to suspend one of its Asia-Europe loops and may place some of the surplus 6,500 teu ships in the withdrawn string off-hire.
Contracting activity remains at a complete standstill, with no new orders being placed. But owners trying to cancel existing orders are having very limited success, with yards demanding massive penalties to release clients from their commitments.
The busiest sector appears to be demolition, with owners finally starting to dispose of elderly tonnage that can no longer be traded profitably.
In contrast to the beginning of the year when very little boxship was earmarked for the scrapheap, a considerable number are now heading for the beaches.
Maersk Broker expects the amount of capacity likely to be scrapped this year to be around 90,000 teu, with a further 120,000 teu going in 2009. That volume, though, could be revised upwards if the recession is prolonged.
Charter rates in most sectors are now only just above operating expenses, according to Braemar Seascope, whose Box Index dropped to 57.09 this week, the weakest yet, with the figure beneath the January 2002 low. When adjusting for inflation and higher running costs, the industry is in far worse shape than six years ago, as the number of ships in lay-up testifies, Braemar Seascope said.
The Maersk Broker Container Index fell by almost 25% to 611, with the slide continuing this month.