German Ship Owners Face Market Collapse

German container shipowners, who control a third of the world box ship fleet, are facing increasing financial difficulties and the threat of bankruptcy as charter rates test fresh lows with the end of the peak shipping season.

Seventy percent of laid-up charter vessels are owned by Germans, led by Claus Peter Offen, which has laid up 17 vessels of 37,700 20-foot equivalent units, according to Alphaliner, the Paris-based consultancy.

Around 10.7 percent of the world container fleet is currently laid-up with the majority owned by charter owners as ocean carriers are returning leased tonnage when hire periods expire in order to keep their own vessels employed amid sharply lower cargo volumes.

The depth of the crisis was highlighted by confirmation that Peter Döhle Schiffahrts, one of the world's largest charter shipowners, has applied for loans from a government fund set up to help companies survive the global economic downturn.

Claus Peter Offen also is reported to have applied to the fund for up to $150 million.

The two privately owned companies, which together own and manage over 300 ships from small feeder vessels to 14,000-TEU ships, need to tap fresh sources of financing to order new ships as banks and private investors are reluctant to increase their exposure to the sector following the collapse in charter rates.

The move for state aid comes just weeks after Hapag-Lloyd obtained $1.8 billion of state loan guarantees after its owners agreed to inject $1.4 billion of fresh capital into Germany's biggest ocean carrier.

Meanwhile, more than 100 of the KG shipping funds that own a significant share of the German container ship fleet have asked investors for additional cash to cover losses stemming from lower charter rates and to pay for laying up vessels.

An increasing number of the funds, which are popular among German professionals such as doctors, dentists and lawyers seeking tax breaks, are thought to be close to collapse as funding dries up.

Ship-owners and KG funds are bracing for further falls in charter rates and rising lay-ups as cargo volumes slow to a seasonal low and shipyards deliver vessels ordered during the 2006-2008 bull market.

A 1,000-TEU geared Handy-size ship, popular among German charter owners, is earning $4,000 a day on the spot market compared with a 2008 average of $10,346 and $12,500 in 2007, according to London broker Clarkson. Average daily rates for 3,500-TEU geared Panamax vessels are in freefall, tumbling to $5,500 from an average of $26,125 in 2008.