Container Market - Between a Rock and a Hard Place

 

 Some independent ship-owners are faced with either lowering charter rates to help save ailing carriers or risking their assets going idle.

 

Much of the focus on the recent slump in the container shipping market has focused on the bottom lines of the operators moving cargo on the water, with ever-diminishing profits (that have now almost universally turned to losses) being the driver of a new round of M&A and alliance forming.

 

However, less is known about the financial health of the roughly other half of ship owners who charter their assets out. This is mainly because very few non-operating owners make their financials available to the public and, with some notable exceptions; they tend to prefer to stay in the background.

 

The available annual results for 2015 of some of the leading independent owners show that last year was generally still a profitable one, but the financial pressures are building up. 

 

Firstly, charter rates are plummeting as demand for their assets fall – The Howe Robinson Containership Index that measures charter rates across a broad range of sizes is currently down by over 40% year-on-year – and secondly, the risk of charter renegotiations is increasing as the financial health of their clients worsens.

 

There can be no doubt that this will be a challenging year for all types of owners of containerships. Any sense of security that independent owners may have previously felt from chartering out ships to Top 20 global carriers has disappeared. 

 

In particular, owners that invested in speculative newbuilds back in 2013-14 that are due to be delivered soon and are yet to find a charterer, and those with existing ships that are due to come off-hire, will be increasingly worried about their chances of fixing them at acceptable rates.