The following was published in the October 04 2001 edition of Lloyds List

Charter rate meltdown

Unprecedented decline reflects a growing crisis within liner shipping industry and has been described by a broker as 'much more serious than in 1999', writes Janet Porter

CHARTER rates for large containerships have plummeted over the past week, with no sign of an end to the market collapse. Mediterranean Shipping Co has taken the 2,800 teu 1996-built Northern Virtue for 12 months at price of just $11,500 a day. A week ago, ships of that size would have been fixed at around $14,000.

Brokers are waiting to see whether this fixture proves to be a blip, but suspect not. A fall of that magnitude within such a short space of time "has never happened before", one broker said.

The unprecedented decline reflects the growing crisis within the liner shipping industry, with carriers redelivering chartered tonnage as they strive to cut capacity. A pair of elderly containerships have been put into lay-up, but much more is likely to be mothballed as freight rates collapse.

Indeed, Howe Robinson is warning that "there is now a real prospect that post-panamax newbuildings will head for lay-up on delivery". Howe Robinson's containership charter market index out yesterday provided a clear illustration of market weakness, with the single biggest weekly fall since it was introduced in 1997.

The index has plunged 31.1 points over the past week or 5% to 614.3, with the 14.5 point decline in the figure for 2,900 teu gearless tonnage responsible for most of the drop. And with the threat of global recession growing, the outlook for the containership charter market is worsening day-by-day. "Even with some form of economic recovery in 2002, the orderbook of larger ships suggests that problems of an even greater magnitude are in store for the world's liner companies," Howe Robinson predicts in a preview of it forthcoming market report.

Clarkson Research Studies estimates average rates for 1,700 teu gearless tonnage fell to $8,700 a day last month from $8,950 in July and $15,500 last summer. Rates are still above those of two years ago, but brokers believe present conditions are very different because of the ship supply situation and global economic prospects. "This is much more serious than in 1999," said one broker.

Michael Pryce, Wellington, New Zealand

-- Rich Marsh (marshr@airmail.net), October 10, 2001