CONTAINER SHIPPING | Uncertain future for panamaxes

CHARTER rates for panamax containerships are powering ahead as lines sweep up all available capacity.

Fixtures are being concluded at headline rates more than double those that owners were obtaining earlier in the year.

However, the long-term future for this class of ship is very bleak, an industry expert warned this week.

Germanischer Lloyd executive board member Hermann Klein predicts that charter rates for boxships designed specifically to comply with the maximum dimensions of the Panama Canal “will go through the floor” when the much larger locks now under construction are opened in 2014.

Panamax containerships are basically an artificial design that will become redundant once there are virtually no limitations on the ships that can transit the canal, he argues. Their length and high ballast content will deter operators who will be looking for very different specifications for the workhorses of the future, Dr Klein forecast during a visit to London.

“I am convinced panamax containerships will be the losers,” he continued. “The market will decide, but charter rates are likely to be very low.”

Ships in the 6,000 teu-8,000 teu size bracket will probably replace today’s panamaxes, with the next generation of containerships expected to incorporate very different specifications from those of ships now in service.

Dr Klein cast doubt on whether owners with ships on order but not yet under construction would be able to make any adjustment to designs, despite the fact that they may be built with already dated technology as pressure intensifies to invest in low-carbon ships that will be operated at slower average speeds than in the past.

That is because main engines may have been ordered, while yards will be reluctant to return to the drawing board without financial incentives that owners are unlikely to offer.

A change of thinking is needed before new orders are placed, with Germanischer Lloyd pressing for designs to be based on projected average ship speeds over the lifetime of a vessel, rather than the maximum as has always been done in the past.

Slower average speeds will enable naval architects to produce blueprints with different hull forms and propulsion systems, and less powerful main engines, said Dr Klein, who is also the current chairman of the International Association of Classification Societies.

Unlike some industry leaders who predict that new containership orders could be placed within the coming 12 months, as operators recognise the need for more technologically advanced ships that meet emission targets that are likely to be imposed on shipping, Dr Klein said he did not expect much ordering activity for another couple of years.

When owners and operators do return to the shipyards, Dr Klein said he did not anticipate any interest in panamaxes that go up to around 5,000 teu, given the imminent opening of the expanded Panama Canal.

“If it makes sense to order, it has to be for much more efficient ships than those in existence today,” he said.

Right now, though, panamaxes are in hot demand with German owner Claus-Peter Offen securing a reported $19,400 a day for two years from United Arab Shipping Co for the 5,042 teu Santa Priscilla and Santa Petrissa.

A few weeks ago, the 5,770 teu Santa Victoria and Santa Virginia were fixed for just $7,500 a day for a variable period, while the 5,060 teu Kaethe C Rickmers was chartered for 12 months at $8,700 a day, albeit with a 12-month option of $25,000.

“Owners’ confidence and expectations are increasing by the day,” Maersk Broker observed in its weekly commentary.

Three months ago, owners were hunting for employment, but now the situation is reversed with charterers chasing the remaining suitable vessels.

The positive sentiment is cascading down to the 3,000 teu-3,500 teu segment as tightness in the panamax sector spreads.

According to Braemar Seascope, owners are now quite prepared to walk away from negotiations in the expectation that rates till continue to rise.

At the same time, ships with wide re-delivery windows are unlikely to be returned any time soon, with lines anxious to keep hold of tonnage fixed when rates were rock-bottom.

Howe Robinson’s weekly index was lifted 6.91% yesterday to 426.9 as the 3,500 teu component gained 29.5%, and the 4,300 teu element advanced 16.2%.

Source: LLOYD’S LIST

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