Red Sea crisis fuels containership charter rates
The Red Sea crisis has created unexpected momentum in the containership charter market, alleviating to an extent the consequences from the large orderbook.
Most liners divert their vessels through the Cape of Good Hope, leading to a ship shortage that “has already driven up charter rates by 30% since the end of December” according to Linerlytica.
“The bigger sizes have enjoyed the largest gains” Linerlytica’s Hua Joo Tan notes to S-X. He provided data indicating that one-year charter rates for an 8,000 ΤΕU vessel stand now at $47,000 per day, up 27% on a YoY basis. A 6,500 TEU vessel earns $35,000 per day on average, a 25% increase compared to February 2023.
As for the smaller sizes, Hua Joo Tan comments that “although rates have also increased since November, they remain lower on a YoY basis”. To be more specific, a feeder 1,700 ΤΕU vessel earns $10,500 per day on one-year charters, which is down 23% compared to February 2023.
Latest charter deals prove how strong the market is, especially among the larger vessels. Braemar says that Tailwind Shipping, which is owned by the German retailer Lidl, secured Kea (6,881 ΤΕUs, built 2013) for a three–year charter, with a reported rate of $39,000 per day. The charter for the International Maritime Enterprises’ vessel, that will commence in the summer, represents a notable 15% increase from the last similar vessel fixed approximately a month ago, analysts added.
Linerlytica underlines that the overall sentiment in the market remains positive, “with capacity on both the Transpacific and Asia-Europe routes expected to remain tight in March despite a bumper crop of newbuildings due next month”.
Freight rates ease
Drewry’s World Container Index remained on a downward path last week, further indicating that freight rates’ frenetic rally since December has probably come to an end.
The composite index decreased by 5% to $3,493 per 40ft container last week (29 February).
Freight rates from Shanghai to Rotterdam decreased by 7% or $277 to $3,944 per 40ft box. Likewise, rates from Shanghai to Genoa dropped by 6% or $285 to $4,757 per feu. Rates on the Shanghai to Los Angeles route declined by 4% or $197 to $4,486 per 40ft container.
Drewry expects slight decreases in spot rates from China over the next few weeks.
Vespucci Maritime’s CEO, Lars Jensen mentioned in a LinkedIn post that the Asia to North Europe route is now down 20% compared to the peak it had six weeks ago and the Asia-Mediterranean route is similarly down 24%.
In absolute terms, neverthless, rates are still higher than before the crisis.
Record number of vessels through the Cape
“The Red Sea crisis continues to drive the container market as the number of ships diverted to the Cape route hit a fresh high with no signs of abating” Linerlytica noted in their latest report.
According to the containership specialists, the number of vessels diverted from the Suez to the Cape of Good Hope route has rebounded to a record high of 403 units for 5.14m TEU as of 25 February 2024.
The recent surge was partly due to CMA CGM’s decision to reroute from the Red Sea since 1 February 2024. However, the French carrier has backtracked since then with the 16,022 teu CMA CGM JULES VERNE making an eastbound Red Sea passage last week, while a second ship is scheduled to follow later this week despite escalating risks on the Red Sea.
Several smaller carriers have also added to the number of ships on the Cape route. For example, Tailwind Shipping has added 9 ships on its Asia-Europe service since January. The Chinese carrier OVP has also sent one of its eastbound China-Baltic Russia ships to the Cape route, marking the first Cape diversion by these niche carriers even though all of their westbound ships remain on the Red Sea route.