Charter Rates Plumb New Lows

Container ship charter rates plunged to historic lows and are set for further steep falls in the coming weeks as ocean carriers prepare to return scores of hired vessels to their owners in a bid to shrink costs amid slowing cargo volume.

The rate retreat has mainly hit ships ranging from 500 TEUs to 4,000 TEUs but even owners with larger vessels fixed on long term charters are coming under pressure from carriers to cut rates and delay deliveries of new ships from Asian shipyards.

ASX-Alphaliner's charter rate index hit an all time low of 49 points in March and dropped to a deeper record 43 points in April, the Paris-based consultant said. The previous low point of 57 points was reached in the depth of the bear market of January 2002 before a rapid recovery to a high of 241 in April 2005.

A 1,100 TEUs ship on a twelve month charter is earning $4,068 a day, down from $4,992 at the start of 2009 and $12,758 a year ago, according to the Hamburg Shipbrokers Association. A 2,500 TEUs vessel on a two year deal is commanding a daily rate of $5,655 against $8,923 at the beginning of the year and $25,074 a year ago.

The Association's ConTex index has fallen to 263 from 974 over the past twelve months.

Rates for larger ships have tumbled even more sharply over the past three months, according to leading London shipbroker Clarkson. A 3,500 TEUs gearless Panamax vessel is earning $7,450 a day, 28 percent down on the $9,500 rate in February. Similar vessels earned a daily average of $26,125 in 2008 and $38,427 through the 2005 bull market.

The rate slump has been accompanied by tumbling asset values, putting pressure on leading owners like Seaspan, Danaos and Global Ship Lease which have cut or suspended dividend payments to investors.

Charter ships account for around a third of the 1.3 million TEUs of idled ocean container capacity, or 10.6 percent of the world fleet, according to AXS-Alphaliner, and their share is likely to grow as carriers return vessels as they come off hire.

French carrier CMA CGM, one of the biggest charterers, is expected to cull some of the 180 box ships whose fixtures expire this year as it aligns its capacity to lower cargo volumes on most liner routes.

Contact Bruce Barnard at brucebarnard47@hotmail.com .