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Idled Boxship Fleet Sails Past 1 Million TEUs as Blankings Fail to Stop Freight Rate Erosion

The Loadstar
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November 3, 2022

By Mike Wackett (The Loadstar) –

The idled containership fleet has breached the 1m teu capacity milestone – and is set to jump significantly higher as carriers prepare to temporarily suspend services rather than blank sailings.

According to Alphaliner, as of 24 October, the number of inactive containerships either in drydock or seeking employment had reached 284, for a capacity of 1.2m teu, representing 4.6% of the global cellular fleet.

At the peak of demand in February, as carriers squeezed the charter market dry in pursuit of every serviceable vessel, the consultant recorded 154 ships, for a capacity of 442,000 teu, as inactive, many in drydock, representing just 1.8% of the global fleet, .

“Weakening cargo demand and declining freight rates have prompted carriers to cull some sailings and even temporarily suspend a number of services on major east-west tradelanes,” said Alphaliner.

The Loadstar has seen a big uptick in the number of blank sailing advisories from Asia-Europe and transpacific carriers in the past two weeks, with, for instance, some Asia-North Europe loops being voided in consecutive weeks.

However, Alphaliner does not count a ship as inactive unless it has been idle for more than 14 days – hence the proliferation of blank sailings does not figure in the capacity surplus analysis.

During Maersk’s Q3 earnings call yesterday, CEO Soren Skou reiterated the carrier’s strategy to “take out capacity to meet demand”, as the group recorded a year-on-year 7.6% decline in liftings against a downgraded market contraction for 2022 of 2%-4%.

The speed of the decline in exports from China has made the reactive blanking strategies of carriers ineffective at halting the erosion of spot and short-term rates, and more radical capacity reduction plans will be necessary to avoid a collapse in contract rates.

The Loadstar understands that some of the partners in the three east-west alliances are calling for their networks to adopt ‘winter programmes’ until mid-January, ahead of the Chinese New Year holiday.

“Nobody wants to be the first to cut out a loop and potentially lose market share,” one carrier contact told The Loadstar.

“There are hawks that want radical action and doves that want to carry on blanking, but everybody is suffering, that’s for sure, and getting concerned about next year,” he said.

Meanwhile, on the containership charter market, the increase in surplus open tonnage is putting more downward pressure on daily hire rates and materially reducing durations.

“Charter rates have continued to weaken for classic panamaxes of 4,000-5,300 teu in the past two weeks, with fixtures now typically concluded for periods of six months at a low-mid $20,000 a day,” said Alphaliner.

In fact, a broker source said this week, owners were now prepared to entertain much lower time-charter periods.

“We are talking with owners and charterers on some ships about extensions of 30 to 45 days, and for new fixtures three to four months,” he said.

Alphaliner noted that a daily hire rate of $20,000 for a panamax was “still decent by historical standards”, but was “ten times lower than what owners could achieve in early 2022”.

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