More danger signs of overcapacity and financial strain in the container sector

The availability of containerships on the charter market is reaching frightening proportions, with indications that the number could double to nearly 1,000 by the summer. The number of vessels in layup is already estimated to be in the region of 484, according to the latest figures from AXS Alphaliner. Danaos was obliged recently to fix out a 4,000-teu vessel at a rock-bottom rate of around US$ 7,000 per day - levels 80% down over the year - hoping to park the ship with a charterer for a year just to cover operating costs. Maersk is setting a cost-cutting target of US$ 1 bn in the coming year.

Shipping owning companies in the container sector are facing increased pressures as a deluge of new tonnage is coming into the market and cannot be assorbed. Liner operators are suffering substantial losses so rates have collapsed and more and more tonnage is being redelivered. Liner companies in the transpacific are taking drastic action to raise rates in response to shrinking demand and failure of service closures to lift spot rates.

The TSA's Brian Conrad describes such efforts as a matter of survival.

"The carriers have reached a point where financial survival, not utilisation or market share, has to become the driving force," he said.

State-owned liner companies are less likely to default on charters, but they will probably show increasing preference to their national tonnage. The private liner companies will have to take drastic action to stem their losses. Vessel provider companies like Danaos and Seaspan will increasingly be facing the fallout in the way of redelivered vessels and marginal charter rates.

There is the specter of newly built Panamax tonnage going directly from the yards to layup.