Russbroker Charter Market Commentary – Liner and feeder operators look to optimize fleets and schedules

The Charter Market of the Caribbean December 2013 to March 2014

Liner trades in general are suffering from depressed sea freight levels and the Caribbean liner trade is no exception.

In an effort to reduce overhead and operating expenses, Caribbean liner and feeder operators have taken advantage of economies of scale and optimized their fleets and the patterns of their services. 

For some services, a return to profitability meant a slight reduction in carrying capacity. Other operators have been entering into vessel sharing agreements and have upsized from two smaller to one larger vessel with an adjusted schedule. Across the Florida, Caribbean and North Coast South America area the overall number of chartered ships has been reduced.

With the Caribbean showing very little new employment and a tendency towards larger units of 1,000 teu plus, owners of ships between 500 and 950 teu were left without employment and decided to reposition their ships to other areas. In particular, the small segment of 500 to 700 teu geared vessels moved away from the Caribbean, partly in sales transactions. While, at this stage, this may not create a problem, it may have a negative impact later when operators need this tonnage to serve smaller ports.

Tonnage

The container charter market, especially for the standard sizes of geared vessels between 950 and 1,800 teu, moved sideways only. Owners of charter tonnage have accepted long waiting times and short ‘in between’ employments only, but declined to fix lower levels. In any case, current rates are only marginally above vessel operating expenses and still not enough to cover capital expenses.

The long-term future of Caribbean container chartering is misty, with a lot of factors fuelling the uncertainty. One key factor is Venezuela’s development. Congested ports with slow productivity and reduced imports and exports have forced established operators to leave the trade and adopt a ‘wait and see’ position.

Meanwhile, feeder operators are waiting for the verdicts of authorities in respect to the P3 Alliance of Maersk, MSC and CMA CGM in order to schedule services around them.
Maersk is rebranding Sealand as an independent service provider ‘in the Americas’ starting in 2015 but has not yet announced much more than this. It is expected that Maersk is looking to repeat what it has accomplished in Asia with MCC and Europe with Seago Line. The introduction of ECA-Zone (the North American Emission Control Area) in 2015 and the Panama Canal expansion are milestone events that will change trades.

Sale and purchase transactions on the container side resulted in tonnage leaving the Caribbean rather than entering the region. There is still tonnage, currently trading in the Caribbean, which is available for sale, and thus bound to leave when sold. The technical features of these ships are proving to be insufficient for the region, lacking flexibility in container dimensions and fuel efficiency. In the current circumstances, it will be unattractive for shipyards to build – and charter owners to operate – small, Caribbean-suitable vessels. In fact, there is zero building activity under 1,000 teu in this respect. As a result, in the not-too-distant future, operators will face limited availability of suitable, flexible and economic tonnage to serve small ports.

Stability

The multipurpose, general cargo and heavy lift market in the US Gulf and the Caribbean has enjoyed stability with balanced supply and demand. Tonnage is often picked up on the basis of round voyages or short periods and the levels have remained stable for the past four months.

Standard tweendeck tonnage of about 8,000 dwt with two cranes of 80 tons fixed US$ 6,000 to 6,500 per day ex USG/Caribs and 1,2500 dwt with two cranes of 80 to 120 tons was taken at US$ 8,000 to 8,500 per day. Operators focused largely on economic tonnage. The demand for such tonnage has led to ordering of new tonnage (12,000 to 14,000 dwt with two 250 to 450 ton cranes) against long-term charters.

After intensive recycling of tonnage in 2012, reefer tonnage finally enjoyed a decent year in 2013 and expectations were high for 2014. The optimism was short-lived, however. The banana crop in Ecuador and the demand in Mediterranean dropped. Spot activity almost stopped in February and came back at a reduced level in March.

It is worth noting that a containerized fruit service to the US East Coast and US Gulf returned to dedicated conventional reeferships with good container capacity for reasons of port facilities and storage. The planned merger of Chiquita and Fyffes will bring interesting new scenarios.

Information supplied by:

Ernst Russ Shipbroker GmbH & Co. KG
Neumuehlen 9, 22763 Hamburg, Germany
Tel: +49 40 380 3030
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