Meltdown: More Container Ships to be Idle

Container ship charter  owners are preparing to lay up more ships in coming weeks as hire rates reached new lows and operators make demands for bigger discounts, reports the Journal of Commerce Online.
The publication quotes AXS Alpha liner as reporting there were about 400 ships totaling 1.1 million TEU total capacity, which is equal to 8.8% of the world’s fleet that were idle at mid February, with additional ships being added daily. The shipbroker Clarkson says this number is probably on the conservative side.
The layups have become necessary because charter rates no longer cover vessel financing costs.
The article gives examples of charter rates that have been re-negotiated – Eurosease agreeing to decreasing the rate on one ship from $ 18,500 a day to $ 12,000 for a 1,742-gt ship, and from $ 16,500 a day to ,000 for a 1,932-TEU vessel.
It adds that while many owners have adopted ‘hot’ layups in anticipation of ships resuming trading shortly, they are now adopting ‘cold’ layups that involves considerable expenditure in maintaining the idle ship for a longer period.
In other examples JOC quotes average daily charter rates for a 1,700-TEU ship as having reached $ 5,418, down two-thirds from the $ 25,074 the same ship achieved 9 months ago. A 3,500-TEU gearless container ship had dropped 44% in three months to $ 10,500 from $ 15,500.
Adding to the woes the article says that ocean freight rates have fallen even more, thus widening the gap with charter rates. Rates between China and Europe have plunged nearly 70%, said the report quoting London-based Drewry Shipping Consultants.
Source: JOC Online