Red Sea challenges boost charter rates
11.03.2024
Analysts and brokers are continuing to report charter rates spiralling upwards as carriers look to plug gaps in their diverted Asia to Europe services as rates, which were falling decisively in early December, make a rapid rebound.
Linerlytica’s charter index increased 5% last week with the larger sizes getting the biggest boost as supply was limited.
“Maersk and CMA CGM have been particularly active in recent weeks, along with smaller carriers such as SeaLead and Tailwind that have been keen to secure additional tonnage for their Med routes,” said the analyst.
Meanwhile, London-based shipbroker Braemar reported a 46% increase in its container charter market index, Boxi, since mid-December when the Houthis first began missile attacks against international shipping in the Red Sea, Bab al-Mandeb and Gulf of Aden.
According to Braemar, carriers have scrambled to deploy tonnage on diverted Asia to Europe services that have been diverted around the African Cape.
Diversions around the Cape require an extra two to three ships forcing lines to vacuum up tonnage to maintain weekly schedules.
As a result, the broker had forecast charter rates to fall to a 70-point low and to average around 80 points in 2024. But as the Red Sea crisis hit the Asia to Europe trade the index did a U-turn recording a steep increase in January from 90 points to around 130 today and still rising.
Braemar commented, “Geopolitics have ambushed our time charter estimates for 2024 and we have had to have a rethink. Instead of an average of 80 points and a low point of 70 points in 2024, the upwardly revised forecast is for an average of 130 / 135 points with a high point of 145 / 150 points.”
Meanwhile, Alphaliner reported that owners and charterers are engaged in a struggle, with owners seeking to close contracts with extended periods, but cautious carriers wary of the volatile nature of the current market conditions and, therefore, looking for shorter deals.
Alphaliner believes the larger vessel market is largely spent now, with no new fixtures in the 7,000-13,000 TEU range, leading to a rapid rise in the medium sized range of 4,000-5,000 TEUs, now stabilising which means that attention has now turned to the smaller vessels.
“In the smaller sizes, the fixing activity was frantic in the past fortnight, especially between 1,000 TEUs and 1,900 TEUs with around thirty fixtures concluded. Fast-expanding SeaLead was one of the busiest market players, fixing seven vessels of 1,700-1,800 TEUs, including several modern ‘Bangkokmax’ units,” said Alphaliner.
Braemar puts this fixture surge into dollars, with its original estimates for this year for an 1,700 TEU ECO-Bangkokmax at US$9,000—US$10,000/day, now revised upwards to US$14,000 to US$15,000/day.
Braemar said the Israel - Hamas conflict is continuing and therefore the Houthi attacks will continue, as seen this week with devastating effects on the crew of the True Confidence.
“We are not political commentators but the chances of the Red Sea avoidance situation remaining, perhaps for the whole of 2024 could be a possibility. With this in mind liner companies will be planning well into the future to minimise service disruption.”
As a result, Braemar has revised its estimates on vessel oversupply for 2024 from the expected 19% to 10%, “effectively halving oversupply in 2024”.