Unprecedented gains in containerships in 2021

By George George

Regular liner shipping companies will record profitability in 2021, as freight rates in the container transport market remain at very good levels and the outlook looks positive in the short term.

The results of the third quarter are indicative. According to Danish consulting firm Sea-Intelligence, liners’ earnings before interest and taxes (EBIT) were $ 37.24 billion in the third quarter of 2021. Combined with operating profit of $ 42.1 billion in the first quarter. In the first half of the year, companies recorded operating profits of nearly $ 80 billion in the first nine months.

In fact, the data does not include the second largest regular airline company in the world, the Mediterranean Shipping Company (MSC), which is not listed and is not obliged to publish results.

The French CMA CGM recorded a net profit of 5.6 billion dollars in the third quarter, with consolidated revenues “climbing” by 89% on an annual basis. Also, the net profits of the Chinese COSCO Shipping Holdings increased by 1.651% in the nine months, on an annual basis, while the revenues by 117.5%. The Israeli Zim recorded a threefold increase in revenue on an annual basis in the third quarter of the year.

To understand the magnitude of profitability, it is noted that the operating profit of liners for all quarters of the period 2010-2020 amounted to 37.86 billion dollars. In other words, in the three quarters of 2021 the profits of the sector doubled compared to the whole period 2010-2020. “These are unprecedented levels of profitability,” said Sea-Intelligence analysts.

According to the Alphaliner database, the leading scheduled company is the Danish Maersk, followed by MSC and the CMA CGM closes the top three.

The course of the market

“The continuing perfect storm of high demand, tight capacity, port congestion, changes in consumer habits and general disruptions in the supply chain are triggering a boom in fares like we have never seen before,” she said. of the Norwegian analytics company Xeneta, Patrik Berglund.

Market conditions are determined on the basis of supply / demand balance. In recent months, demand has significantly exceeded supply, leading to high fares. “There is a battle between the charterers to ensure tonnage,” an analyst told “K”, adding that any ship that leaves the charter immediately concludes a new agreement with high prices.

Although some indicators have shown a slight correction of spot fares and time charters in the past, the amounts at which charters close are currently at the highest levels in recent years. “We have reached a state of stabilization. The term fall may be technically correct, but it sounds wrong when the fares remain ten times higher than the levels of previous years”, its senior analyst has pointed out to “K” and Capital.gr Alphaliner, Jan Tiedemann.

At the same time, the congestion in the ports “holds well”, which limits the available tonnage. In this context, scheduled airlines avoid approaching ports or postponing services. It is indicative that the consistency of containerships remains below 40% in the ten months of this year. Companies such as Maersk, CMA CGM and Germany’s Hapag-Lloyd have recently announced changes of routes, avoidance of approaches and significant delays in ports in Europe, Asia and the Americas.

“At least for the next six months I do not see any dramatic change in the market”, says in “K” an analyst of a listed company, of Greek interests, with a fleet of containerships. He adds that there may be a small “gap”, a drop in the market for about a month, during the Chinese New Year period (February 2022), but then the market will recover.

The head of another listed Greek shipping company emphasizes in “K” that the fundamentals of the market are particularly encouraging. He focuses on two factors that may lead to a correction in fares. A turning point will be, he says, the arrival of 2023, when the many containerships currently under construction will begin to be delivered and may cause an “anomaly” in the supply-demand field. At the same time, he said, reducing government supplies to consumers, which were the result of a pandemic and boosted consumer spending, could reduce demand and thus play a key role in developing tariffs.

Perennial charters

The positive course of the market is discounted, as analysts report, by the multi-year charters that are closed today, several of which, in fact, start in the second quarter of 2022.

“The rush of liners, who are on the market and closely monitoring cargo flows, to close tonnage even a year before the current charters expire, indicates that there are not enough ships to carry the cargo currently in circulation,” he said in a recent Capital Link conference by CFO Danaos Corp. (interests Giannis Koustas), Evangelos Chatzis.

In this light, Aristides Pitta’s Euroseas secured a charter for the “Synergy Oakland” (capacity 4,253 TEUs and built in 2009) with a duration of between two and three months, which will start on January 5-25, for $ 130,000 per day . The same steamer, immediately after the completion of this agreement, will be chartered for a period of 48-51 months to another charterer, for $ 42,000 per day.

“Both the price and the duration of the charters are indicative of the strength and recovery of the market from the mild correction recorded last month. We expect that we will continue to be able to take advantage of current market levels,” he said. Pittas.

In April 2022 it is estimated that it will start a three-year charter for “Artotina” (capacity 2,524 TEUs and built in 2001), which belongs to Danaos. Daily fares are estimated by freight brokers at $ 28,000.

A three-year charter with a starting horizon in January 2022 is reportedly “locked” by Thanasis Martinou’s Eastern Mediterranean Maritime (EastMed) for “Tzini” (capacity 1,756 TEUs and built in 2013). The price is unknown in this case.

Companies are devising a new strategy

“With contracts continuing to close at high prices and no obvious signs of declining demand, liners are particularly bullish for the future,” notes Patrik Berglund. “Many have already announced or are ready to announce fleet expansion moves and plans for new routes. Therefore, it is very interesting to see how this situation will affect the market,” he added.

In these conditions, the shipping companies adapt their strategy so that they can be better placed in the market. Thus, it is observed that the regular line companies, which charter (“rent”) the shipowners’ ships, themselves buy used tonnage to transport the required cargo. The analyst explains that this is due to the lack of tonnage available for charter, the high prices and the long duration of the charters.

MSC has proven to be a keen buyer of second hand container steamers. The company has acquired more than 120 such ships in the last year. In fact, the shipping company was finally connected with the purchase of two sister ships, with a capacity of 6,039 TEUs and built in 2007 each. The reason for the “Long Beach Trader” and “Los Angeles Trader”, which belong to Lomar Shipping by George Logothetis. The latter exploits the “launch” of values ​​in the market and sells ships at much higher prices than the amounts paid to include them in its fleet.

Another regular shipping company, Taiwan-based Wan Hai, was linked to the purchase of the “Box Express” (capacity 1,708 TEUs and built in 2016), for nearly $ 41 million. This containership belongs, according to the Equasis database, to Allseas Marine, interests of the shipowner Michalis Bodouroglou. The Taiwanese company is very active in second hand and new toning.

On the other hand, there are examples of companies that, while operating in other industries, look with “good eye” at an expansion in the market of containerships. In this context, various rumors that have recently been leaked to the shipping market connect a large shipping group of Greek interests, which has not been active in containerships for a long time, opening up in this market, “seeing” the fares at high levels. According to competent sources in “K”, it seems that he is looking for charterers for two containerships under construction, with a capacity of 1,900 TEUs each, which he bought (resale agreement) and which will be delivered in 2022.

The Greeks are investing

At the same time, the interest of Greek shipowners with a fleet of container vessels for investment investments is increasing. Thus, a number of companies have placed orders for new tonnages, despite the high cost and the extension of the delivery times of the ships.

The latest example is the Costamare of Kostis Konstantakopoulos, which ordered four containerships with a capacity of 13,000 TEUs each and four more, with a capacity of 15,000 TEUs each, in a yard of Asia. All steamers will be chartered for a long time with a leading scheduled company.

At the same time, Aggeliki Frangou’s Navios Maritime Partners ordered 2 + 2 container vessels, with a capacity of 5,300 TEUs each, at a Chinese shipyard. This is the second order at the same shipyard, after the one that became known in the middle of the summer for 4 + 2 containerships, of the same capacity, which will join the shipping fleet in 2023 and 2024.

Vaggelis Marinakis ‘Capital Maritime, Tsakos Shipping & Trading, interests of the Tsakos family, and Aristides Pittas’ Euroseas have invested this year in new containerships, with a capacity of 1,800 to 5,300 TEUs. A shipbuilding program for four ships, with a capacity of 13,000 TEUs each, is reportedly run by Lou Collakis’s Chartworld this year. Newer information, transmitted by Alphaliner, stated that the German container transport giant Hapag-Lloyd allegedly acquired two of them and chartered the other two for a long time.

The container book order book has expanded dramatically through 2021. According to Clarksons Research Services, of the total orders placed internationally in the 2021 decade, 44% by capacity and 42% by value are containerships. The order book of new containerships corresponds to about 23% of the ships in the water, while last year the relative proportion was 10%.