Containerships: Optimism on the horizon in parallel to postponed deliveries

Fundamentals suggest further improvements for the liner industry, as the idle containership fleet stands marginally above 80 units, with a combined capacity close to 225 k Teu. This translates into around 1 per cent of the global container capacity, which stands at 21.4 Mn Teu. The appetite of ocean carriers remained high, with interest for additional tonnage to be either employed in new services or to upgrade already existing services. This trend supporting the charter market is expected to last at least until the end of 2018 H1. But as the fleet capacity keeps on increasing, 5.8 per cent up at end of April 2018 year on year, there is concern for the performance of the freight market. Rates from China have managed to strengthen lately, with the SCFI up by almost 20 per cent month on month. But the CCFI has marginally declined during the same period.

However, the scheduled deliveries must still be causing a headache to several investors. As more than 1 Mn Teu will get delivered over the next couple of years, mainly due to deliveries of new ultra large units, the balances across many trade routes will feel the impact. Further cascading is expected, with more containerships larger than14 k Teu to be employed in routes between Asia and the Mediterranean, and the transpacific, Asia and Middle East.

This wave of new tonnage comes later than expected, due to several liner operators having pushed back some of the deliveries originally scheduled for 2018 into 2019, enabling them to adjust their operations and future capacity employed. So far, more than 0.3 Mn Teu of deliveries originally for 2018 have been pushed into 2019. Deliveries for next year are now expected to reach 0.85 Mn Teu.

In the meantime, scrapping has been another very useful tool in the hands of liner operators during the last couple of years. However, this has proved to be less dynamic since the beginning of 2018, with only 40 k Teu removed from the market so far, mainly driven by the improving market conditions and the higher expectations for future earnings. Most of the newbuilding contracts in the last four months have been linked to the requirements that need to be met IMO’s regulations on emissions.

Earlier this week, Navios Maritime Containers acquired two 8.2 k Teu, the “YM UTMOST” and the “YM UNITY”, from Navios Maritime Partners for USD 67 Mn in total. Both units are chartered out with a daily charter rate of USD 34,266 till August and October 2018, respectively. Navios Containers will also acquire the 10 k Teu “NAVIOS UNISON”, built in 2010, from a third party not yet disclosed, for USD 50.25 Mn. This lady has been chartered out at a daily charter rate of USD 26,663 till March 2019. Within the next 12 months, these additions are estimated to increase EBITDA by USD 18.7 Mn. Delivery of all three units is expected within 2018 Q2. The transactions will be financed by cash and USD 61 Mn from a new bank debt. This brings the fleet of vessels that Navios Containers owns to 25 units, with a combined capacity close to 120 k Teu. On average, this fleet is just over 10 years old.

The announcement for these additions came on the day that Navios Containers reported a profit of USD 3.04 Mn for the first quarter of 2018. Year-to-date, the company spent USD 129 Mn on fleet expansion, while it has finalised a sale and leaseback deal, worth USD 119 Mn, with a Chinese finance institution, to refinance debt due by the end of 2019. This will push debt maturity to 2023, while purchase options are provided.

Fotios Katsoulas

Head of Research, Affinity Shipping LLP Posted on 10 May 2018| 14:33 (GMT+1)
  • 0 COMMENT
  • SHARE

Related posts

Comments

Its's free! Learn More
To read articles you will need to
signup or login.
It's totally free!
By signing up,you agree to our
terms of service and privacy policy