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Much improved charter market, but mega ships pose lasting danger

MUCH improved demand has brightened the charter market these days, but the relentless stream of mega ships continues to depress freight rates, reports Singapore's Splash 24/7.

In his latest monthly Container Forecaster, Daniel Richards, of Maritime Strategies International points to a stronger demand outlook and a busy peak season.

Months of volatility have been followed by a strengthening container market that is moving closer to underlyng fundamentals, writes Mr Richards.

Robust macroeconomic fundamentals have seen headhaul mainlane volumes increase five to seven per cent in the year to date with every sign showing this is likely to continue.

North-south growth certainly surpasses last year's weak volumes, he notes. Volumes to and within the Far East have slowed year on year.

While July's charter market remained weak for vessels smaller than 8,000 to 9,000 TEU, August began to recover losses in mid-size rates.

On the supply-side there remains a gulf between delivery and scrapping that is very likely to widen.

Monthly deliveries are currently running at above 100,000 TEU per month (125,000 TEU in July) and given that at least one 19,000- to 21,000-TEU newbuilding comes every two to three weeks, this rate is set to continue.

"The key dynamic will be how these mainlane capacity injections - and their interaction with trade volumes - will affect the cascading," said the report.

In the view of Maritime Strategies International, a slowdown in trade volumes (for example, even to around two per cent year on year) would place significant pressure on vessels smaller than 12,000-TEU.

The pace of the current rebound is faster than expected, but in our view short-term volatility in the 3,900- to 12,000-TEU fleet segment is going to be an increasing fixture of the market as these vessels become "swing" providers of tonnage. We expect some further gains for mid-size vessels over peak season, before a falling off after October.