Ocean Carriers Re-enter Charter Market Due to Increased Demand

Aerial view of shipping containers
Updated Published

The anticipation of better-than-expected demand across both major and secondary trade routes is leading ocean carriers to re-enter the charter market in search of available tonnage. According to insights from Maersk Broker, larger vessels are predominantly booked, with new tonnage availability expected only from the forthcoming spring. This scenario is supporting the sustenance of daily hire rates.

Maersk Broker has observed a “considerably active week” in the containership charter market, a sentiment echoed by Braemar, a London-based shipbroker. Reports indicate a robust number of fixtures, alongside several ongoing negotiations.

Industry analysts forecast a modest demand growth of 3-4% for the upcoming year. A carrier representative highlighted a "notable enhancement" in their six-week booking visibility forecasts across various networks.

This positive development is encouraging carriers to intensify their rate restoration initiatives, especially in the Asia-North Europe trade lane. Many lines have announced new Freight All Kinds (FAK) rates of $3,000 per 40ft container starting 1 January, a significant increase from the market spot rates, dropping to $1,000 in early December.

Keeping up with the trend, MSC, the world's largest carrier, has also adopted the substantial increases in FAK rates, which ensures their acceptance in the market.

Factors such as the Chinese New Year (beginning 10 February), as well as diversions via the Panama Canal and the Red Sea, are influencing shippers to advance their shipment dates to account for longer transit times. A shipping line executive expressed optimism about the robust forward bookings from Asia, hoping for this trend to persist post-Chinese New Year.

Despite December's traditional quietude in the container charter market, brokers report new inquiries almost daily, unaffected by the holiday season's proximity. A shipbroker shared that while the market lacks new vessels for sale, there is healthy activity in extending existing charters.

In the current market, where new charters are scarce, the primary focus among brokers is on extensions and re-lets. Shipowners are showing increased flexibility in hire periods, further attracting carriers to the charter market.

Maersk Broker reports that the charter rates for a standard 4,250 TEU vessel are stable, ranging between $16,500 and $17,000 per day. Though lower than rates during the peak Covid demand, these rates still ensure a reasonable margin above operating costs for shipowners, particularly for vessels without encumbrances.

Brokers note that Panamax vessels, ranging from 4,000 to 5,400 TEU and essential for secondary or niche trades, continue to be in high demand. "The Panamax segment remains the most active," states Maersk Broker, noting ongoing discussions for extensions and new employment opportunities.