Container ship mkt to improve end '09-Maersk Broker

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30 May 2009

Container vessel chartering rates have probably hit bottom and the container ship chartering market is likely to pick up at the end of 2009, said the head of Maersk Broker, one of the world's largest shipbrokers. The global freight market has been hit hard by slowing trade due to the economic downturn, and container shippers have reported sharp decreases in freight volumes and rates.
"In our opinion the container vessel chartering rates have generally reached the bottom. They could remain there for a while, but it won't get much worse than now," Maersk Broker Chief Executive Officer Jorn Nielsen told Reuters this week.
A chartering rate is the cost of hiring a vessel.
The privately owned Danish firm's core business includes chartering of container vessels, tankers and bulk carriers, contracting new vessels and sale and purchase of ships.
The broker's owner is also the biggest shareholder of world No.1 container shipper A.P. Moller-Maersk.
Nielsen said in an interview he saw the container chartering market stabilising in 2010. "Our estimate is that, when you get a little further ahead, maybe at the end of 2009, it's beginning to look slightly brighter."
"We base that on our view of the world economy," he said. "When we put our ear to the ground, we actually see reason to hope that this crisis is about to settle."
After years of booming business, the shipping industry is struggling with overcapacity as ships ordered years ago have become ready for delivery in the midst of the economic downturn. The number of new ships on order at shipyards equals more than 50 percent of the current world fleet, Nielsen said.
The influx onto the market of new ships currently on order will continue to negatively affect freight and charter rates in coming years, he said.
Many new container ships will not be taken into service immediately as there is no need for them.
"For container vessels we will continue for a while to see newbuildings proceed straight into lay-up until the container market shows significant improvements," Nielsen said.
"You have currently more than 500 container ships idle, and it doesn't look any better if you analyse the order books for the coming one to three years," he said.
Nielsen said owners providing tonnage to the container line operators were currently trading at charter rates which for new deals were merely covering daily operating costs, or even less.
"The new ships will over time be absorbed into the market. I just can't tell you when it is realistic to expect a more balanced scenario."
FEW CANCELLATIONS
But Nielsen said he saw few cancellations of orders for container ships, whereas delivery for many new ships had been postponed.
"Some see cancellations of between 20 and 30 percent of all ship types. We don't share that view. Most of the ships will be built. In bulk shipping it may be around 10 percent, but for container vessels it will be very limited."
Demolition of ships is picking up, Nielsen said, although still at a small volume and with no significant market impact.
"You see container ships that you wouldn't have dreamed of scrapping a year ago, being scrapped, because they aren't commercially viable," he said.

Source: Reuters