Idle tonnage fleet set to soar next year as charter rates tumble

Just 12 months ago, the 2009-built 4,253 teu Synergy Oakland was preparing to commence a two-month charter with Hapag-Lloyd at a rate of $160,000 a day.

Incredible as it may seem, for a classic panamax ship fortunate to achieve $10,000 a day before the pandemic, the charter with the German carrier meant the shipowner was ‘taking a haircut’ on its previous fixture, which saw it earn $202,000 a day for a three-month charter, banking $18m of revenue.

Moreover, Euroseas Shipping, a Greece-based non-operating owner (NOO), acquired the ship for just $10m in December 2019, when its most likely destination appeared to be an early visit to the ship graveyards of the Indian subcontinent.

After the Hapag-Lloyd charter, Synergy Oakland saw a short-duration spot fixture at $180,000 a day before commencing a four-year time charter in March with Israeli carrier Zim at $42,000 a day, bringing in total contracted revenue of $61m.

However, since the summer, when the freight market went sharply into reverse, average daily hire rates for panamax containerships have slumped to about $20,000 a day – and are only prevented from tracking even lower by the lack of open tonnage on the market.

This could all change in the first quarter next year, if charterers are able to buy themselves out of expensive long-term agreements, or if distressed carriers are unable to continue paying elevated hire rates, to carry cargo at low freight rates, and thus breach the payment terms of the charter party.

In both scenarios, the charter market would be flooded with fresh open tonnage, particularly in the smaller sizes in the ‘new normal’ uneconomic-to-operate bracket.