Ship Owners Losing After $11.4 Billion Battle for Boxes
Ship Owners Losing After $11.4 Billion Battle for Boxes
After a quarter in which companies selling space on container lines doubled rates, the amount the owners of the ships are being paid is the least in two years.
Operators, who charter vessels and then charge shippers per container, are demanding $1,379 for a 20-foot box on the China- to-Europe trade route, up 97 percent this year, according to Clarkson Plc (CKN), the largest shipbroker. A measure of how much they’re paying ship owners fell 4.2 percent since the start of January, data from the Hamburg Shipbrokers’ Association show.
The gap is growing because operators are leaving vessels idle or hiring fewer ships, driving down how much they pay owners, while restricting supply and boosting box rates. RS Platou Markets AS and Fearnley Fonds ASA, units of Norway’s biggest shipbrokers, recommend selling shares of Seaspan Corp. (SSW), a Hong Kong-based owner, and buying those of Orient Overseas (International) Ltd. (316), which manages vessels from the city.
“Whatever increase operators are getting is driving them to profitability,” said Rahul Kapoor, a Singapore-based analyst for Platou whose recommendations returned 17 percent in the past six months. “Owners are in no way benefiting and are unlikely to benefit.”
The operators had previously spent 14 months in a price war on the biggest trade routes, losing about $11.4 billion of revenue, according to SeaIntel Maritime Analysis, a research company in Copenhagen. Orient Overseas will report this year its first gain in annual profit since 2010, analyst estimates compiled by Bloomberg show.
U.S. West Coast
Box rates fell 50 percent last year from China to Europe, the second-biggest international route, reflecting a glut of ships rather than contracting demand. The capacity of the global fleet rose 77 percent to a record since the end of 2005, data from Redhill, England-based IHS Fairplay show. Trade gained 44 percent to an all-time high, London-based Clarkson estimates.
Operators’ earnings are also improving from China to the U.S. West Coast, the world’s biggest trade route, with a 40 percent gain to $1,992 since mid-December, Clarkson data show.
The amount of idled capacity will probably expand to the equivalent of 1.1 million boxes by the end of 2012 from 595,000 at the start of the year, according to Alphaliner, a Paris-based industry consultant. Operators won’t renew leases for some ships when they expire, said Fotis Giannakoulis, an analyst at Morgan Stanley in New York. The Hamburg association’s index, a gauge of costs across six types of container ship, fell to a 21-month low on Feb. 28.