Containership Time-Charters Break New Records

Monday, 17 May 2021

By Mike Wackett (The Loadstar) –

Four-year-plus charter deals are becoming the norm as shipowners ratchet up the pressure on liner companies. As their confidence of the sustainability of currently elevated freight rates grows, ocean carriers are committing to ever longer charter periods.

According to one broker, shipowners are dismissing enquiries for periods of less than three years. “One of our owners said today he was not interested in talking about an extension to a ship he has on hire to a liner unless it was for three years – and at double the rate.

“The owners are really in the driving seat now and are looking to lock-in high daily hires for as long as possible,” he said. “There is hardly anything coming onto the market, and what there is going to the highest bidders – that is often MSC,” he added.

The remarkable strength of the containership charter market was further evidenced by the first-quarter results from Greek non-operating owner Danaos Corporation.

“As far as Danaos is concerned we are currently in the best ever position and reaping the benefits of the current market environment,” said chief executive John Coustas. The shipowner reported net income of $58m for Q1, compared with $33m the year before, from operating revenue of $132m, versus $106m last year.

Danaos has also benefited indirectly from the dramatic turnaround of the liner industry over the past year, noting that its shareholding in Zim, gained during the Israeli carrier’s 2014 restructuring, when it took an equity stake in place of charter hire, was now valued at around $400m.

Danaos has a fleet of 65 containerships, ranging from 2,200 teu to 13,100 teu, on hire to most of the top-ranked container lines. Dr Coustas said charter hire rates were at the highest level he had seen in over 10 years, adding that “more importantly durations have been significantly increased”.

He added: “Every fixture we concluded in the quarter was done at a new record level, and we expect to see improved metrics for every quarter this year.”

Moreover, given the duration of its time charters Danaos is confident of positive returns for several years to come. And in terms of the general market conditions, Dr Coustas expected that, with 2022 being “a very lean year for deliveries”, daily hire rates would remain high.

However, Dr Coustas said Danaos would not be tempted into ordering new ships, in view of the current high prices being quoted, as well as the longer-term environmental concerns, instead he said it intended to “build a war chest” with its free cash.

Meanwhile, Alphaliner had a word of caution for carriers: “It is unclear how carriers’ bottom lines might be impacted by the skyrocketing charter costs and the long charter commitments they are taking, especially when cargo demand and freight rates start fading.”