Charter market falls to lowest point since 2002: Alphaliner

CONTAINERSHIP owners are under pressure to deliver return on investment as charter rates drop to historic lows not experience since 2002, says the Paris-based consultancy report, Alphaliner Weekly.

Alphaliner's charter rate index hit a historic low of 49 of points in March and dropped further to 43 points in April 2009, said the report, adding that the previous low point was reached in January 2002 at 57 points before a rapid recovery to hit a high of 241 in April 2005.

Even owners with fixed long-term charter arrangements have come under pressure. This week, New York-listed shipowner Seaspan has given in to pressure and cut its quarterly dividend payments by 79 per cent while fellow owner, Danaos has suspended dividend payments since the fourth quarter of 2008, said the report.

Newly listed Global Ship Lease (GSL), the containership leasing offshoot of CMA CGM, was also stopped dividend payments as it talks to lenders to "waive loan-to-value covenants in view of the drop in ship prices. GSL has been listed on NYSE only since August 2008", said the report.

Although only a small portion of these owners' fleets are due for renewal within the next two years, the drop in both charter rates and asset prices pose significant risks to investors. Any default by the counter-parties could see vessels released into a market where it is difficult to find employment and fixtures, if any available, would be at non-compensatory levels, said the report.

The outlook for owners remains bleak as charter rates are unlikely to pick up in the short term, said Alphaliner. The idle containership fleet remains at a historic high with 10.6 per cent of the fleet currently inactive. Of these, 3.4 per cent belong to non-operating owners and the idle fleet in this segment is increasing by the day as carriers seek to return surplus tonnage upon charter expiry, while newbuildings committed before the downturn continue to be delivered, said the report.

Some 190 charter market ships of over 1,000 TEU, aggregating 375,000 TEU, are either spot or laid up, while another 250 ships, of more than 1,000 TEU and aggregating 400,000 TEU, will see charters end in June, according to Alphaliner records. Some of these will be extended, but a large part of these will be added to the idle fleet.

Some 40 charter market newbuildings, each more than 1,000 TEU, totalling 90,000 TEU, are expected to be built in May and June, and will not have employment on delivery. In the 500-1,000 TEU range, 90 charter market ships for 70,000 TEU are idle while another 170 units representing 120,000 TEU will see their charters expire by end June, said the report.

Source: Schednet