[NOTE: all information and data in this article are sourced from public sources].
The box ship charter markets are all (or, are nearly all) being written in green ink i.e. rates to hire box ships are increasing. If you can charter one, that is.
Container shipping is practically sold out, with trade media reporting that about 0.7% of the world commercial fleet is idle – that’s about 77 ships with a capacity of just over 217,000 TEU.
And that’s despite the number of box ships being at the highest level in history… as are the numbers of TEU capacity. There are about 7,000 active container capable ships, of which about 6,201 are fully-cellular, according to consultant Alphaliner. The difference between the two is likely to be multi-purpose vessels and various kinds of container-capable ro-ro ships. Together, all of those tens of thousands of ships can carry just over 30 million TEU – which is apparently a new world first, according to Alphaliner analyst Jan Tiedemann.
And that’s also against a backdrop of massive container ship deliveries. As international forwarder DHL reports in its June 2024 update: “April saw a record-breaking month for new ship deliveries, with 59 units totalling 342,200 TEU. This marks the highest number of ships delivered in a single month and the largest addition of new capacity. New deliveries are projected to reach historically high levels in 2024”.
Charter rates to hire ships (operators don’t necessarily own all the ships they operate) have been, well, zooming upwards for some time now according to the New ConTex. There’s barely any decline in any sector in any time-based analysis. Year-on-year increases have been recorded in the 30% plus to 47% plus range for numerous different sizes of ships.
Charter rates are being quoted on a 12 month-basis, but that time-frame appears to be a hypothetical with the New ConTex reporting that “there are extremely few fixtures done below 24 months”. Analysis from a week or two ago even adds that the achievable periods for the 4,250 plus TEU vessels “might even move up to minimum 36 months soon”.
Let’s have a look at freight rates. Readers will be wholly unsurprised to be informed (as if they didn’t know already) that rates are largely on an upward trajectory currently. The World Container Index (Drewry) is around USD$5,318 per 40 foot box, which is a considerable increase on the approx. USD$1,500ish seen around mid-to-late July 2023. That’s still 49% below the pandemic peak of USD$10,377 seen in September 2021, Drewry reports. Meanwhile, the Shanghai Containerised Freight Rate Index is showing a similar pattern, being around 2,750 index points about now-ish compared to about 1,000 points for much of 2023.
Analysts at Flexport report that Trans-Pacific East Bound market has strong volumes with general rate increases implemented and further rounds expected. Asia to Europe routes are experiencing “severe” equipment shortages although port congestion is easing, Flexport reports, with rates rising with an increase of about USD$1,500 to $2,000 per forty footer.
The driver, of course, is the ongoing Red Sea crisis. Container shipping operators are most unwilling to risk their assets in an active conflict zone where shipping is being targeted (unless, it would seem, they have direct naval protection). Box ships are being sailed around the bottom of Africa and that adds transit time, and complexity. Schedules don’t get met, congestion builds up at ports with vessels having to wait a few days for berth spots.
“Key transhipment ports, such as Singapore, have witnessed a sharp rise in congestion due to the impact of Red Sea carrier service diversions, which have led to fewer vessel calls but larger average exchanges. This has added to yard congestion. Port productivity has also taken a hit in recent months. The time spent by ships waiting before berthing at high-volume ports tracked by Drewry increased 43% between 3Q23 and 2Q24 – to over 400,000 hour,” global maritime researcher Drewry noted in a late June release.
Drewry adds that the time take to handle 1,000 TEU has risen by 10%. They add that the current crisis is “hitting transhipment hubs” unlike the pandemic crisis which hit origin / destination ports (gateway operations ports).
Ocean shipping companies are now planning a “sharp capacity increase” on the Asia-Europe in early July with an ongoing growth of about 6% for the rest of July and August, according to analyst Sea-Intelligence, which adds that there is also a “sharp imminent increase” in capacity growth on the trans-Pacific with an intention to sustain high supply growth.
But, Sea Intelligence cautions, “The success of these capacity expansions—and their potential to alleviate market pressure—hinges on whether growing port congestion allows carriers to operate the envisioned vessels according to their planned sailing schedules”.
