With rates across the container shipping sector reaching new heights, shippers continue to complain not only about skyrocketing costs but a shortage of capacity at any price, while carriers are recognizing unprecedented levels of profits. While many are questioning just how long these rates can be sustained, one shipowner reported a record new contract this week, while one of the world’s largest carriers, CMA CGM Group, announced it is freezing rates for six months.
The world’s third-largest carrier, the French company grabbed headlines with its surprising announcement, while some questioned if that was the primary purpose. “Effective immediately, and until February 1, 2022, the group is prioritizing its long-term relationship with customers in the face of an unprecedented situation in the shipping industry,” CMA CGM wrote in a customer announcement distributed on September 9. “Although these market-driven rate increases are expected to continue in the coming months, the group has decided to put any further increases in spot freight rates on hold for all services operated under its brands (CMA CGM, CNC, Containerships, Mercosul, ANL, APL).”
Coming at the busiest time of the year, skeptics pointed out that CMA CGM is likely fully booked with minimal space in the spot market. Yet the announcement sent a dramatic signal to the market. “CMA CGM aims at strengthening its valuable customer relationships and providing support as they navigate today’s difficult supply chain challenges,” they wrote while also highlighting that the company has increased the capacity of its fleet by 11 percent since the beginning of 2020, adding more than 780,000 TEU in the past 15 months.
The move comes at a time when demand remains at an all-time peak. Market consultants Drewry reported this week the 21st consecutive week of increases in its freight rate index, pushing it more than 300 percent higher than the same week in 2020. Drewry’s composite World Container index stands at $10,083.84 per 40ft container. “Drewry expects rates to increase further in the coming week but steadily,” they forecast in their analysis.
A further illustration of the soaring rates came this week when the Pittas family of Greece’s container ship operator Euroseas reported, “the highest time charter rate ever achieved by any vessel in our fleet and one of the highest rates ever achieved in our industry.”
Euroseas’ vessel M/V Synergy Oakland, a 4,250 TEU vessel built in 2009, entered into a new time charter contract for a period between a minimum of 60 days and a maximum of 85 days at a gross daily rate of $202,000 or $195,000 depending on where the vessel will be delivered to the unidentified charterer. The new rate will commence in the second half of October 2021 when the vessel is redelivered from its current charter.
The operator of 15 intermediary and feeder boxships reported that its fleet is currently averaging $22,000 a day on its contracts. Other than the Synergy Oakland, which is under a current contract of $64,660 a day, the remainder of the fleet is between $10,200 and $29,500 a day. “Euroseas is well-positioned to take advantage of a further rising market with five ships, including M/V Synergy Oakland after the expiration of its new charter, opening in the next six months,” commented Aristides Pittas, Chairman and CEO of Euroseas.
Analysts are all carefully watching the market to see how CMA CGM’s announcement will impact other carriers and how long rates can continue their record-setting pace.
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