SHIPPING | Idle boxship capacity grows as winter chill sets in

Patrick Hagen | Lloyd’s List | 2010.10.26

SLOWER demand has seen the number of idle containerships rise and carriers expand extra slow steaming in a bid to absorb excess tonnage.

This is in line with recent announcements by carriers to cut capacity on the main trades during the winter season. Maersk Line just said it would reduce capacity on the Europe to Asia trade by 10%. Before, the Grand Alliance partners Hapag-Lloyd, NYK and OOCL announced that their Europe to Asia service Loop D will only offer bi-weekly instead of weekly sailings up to March 2011.

The number of unemployed boxships stands at 138 ships with a combined 289,000 teu, compared to 132 ships with 243,000 teu a fortnight ago, according to analyst Alphaliner. While the total is still quite small, the rise in the number of idle vessels is a clear sign that the winter slump has started to hit vessel employment.

Lower demand has already started to put pressure on charter rates. Charter rate indices such as Braemar Seascope’s Boxi or the Hamburg shipbrokers’ association’s ConTex reflect the downward trend.

A look at the recent fixtures done on the charter market reveals that most deals have been done only for periods of six months stretching over the winter season. Owners are prepared to accept lower rates to cover themselves during this period. However, a Hamburg boxship broker underlined that most owners were expecting rates to rise again after the Chinese New Year. Thus, owners were not prepared to charter vessels out for longer periods at current rates, the broker said.

He added that charterers also seem to believe in a rising market after the winter lull and thus are trying to secure tonnage. This has already led to deals which are favourable for shipowners. Wan Hai Lines for example extended charter contracts for two 1,700 teu vessels and agreed to retroactively raise the rate.

The charter contract for the sister vessels Otto Schulte and Karin Schulte, which belong to shipowner Bernhard Schulte, would have been valid up to March 2011 with a daily rate of $5,900 each.

Now, Wan Hai is paying $8,200 per day retroactively from October 1.

It is expected that extra slow steaming will increase as lines are avoiding sending surplus tonnage into lay-up. Alphaliner estimates that 56% of the services connecting the Far East and the US West coast have already adopted extra slow steaming. This figure is now due to rise.

Another way in which some carriers are apparently trying to prevent the lay-up of vessels is to add capacity to intra-Asia services. APL will deploy three 3,500 teu vessels, which would otherwise not be needed, to its new sling connecting Indonesia and China.

However, such moves will probably not be sufficient to absorb all surplus tonnage. A number of owners are seeking to relet vessels but have not yet found takers.

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