With the avalanche of container shipping freight rates, container ship rents also experienced a cliff-like drop, Israel shipping giant Zim Shipping (ZIM), which mainly charters ships, may become the biggest loser.
ship brokerage company pointed out that the 6-12 month time charter rent of the container ship charter market hit a record high in March this year, and the decline has reached as high as 70-80% by November. Among the popular ship types, the daily rent of 1,000TEU container ships was only US$5,200 in June 2020, and reached as high as US$41,000 in March this year, and fell back to US$11,813 in November.
During the same period of time, the daily rent of a 1,700TEU container ship increased from US$5,788 in June 2020 to US$65,500 in March this year, and has now fallen to US$13,875. The daily rental rates for 2,750TEU container ships are US$8,125, US$82,625, and US$20,438; for 4,400TEU container ships, they are US$7,013, US$121,125, and US$25,375.
So far, Zim Shipping, which ranks 10th in shipping capacity, has the highest percentage of chartering ships, exceeding 90%. At the end of the first quarter of this year, 94% of the company's 150 ships were chartered, and the lease period was mostly 3 to 5 years, with an average lease period of 28 months. The lease period of 11 ships expired at the end of this year. In 2024, there will be 28 and 34 contracted ships, but the company has 46 new long-term chartered ships that are expected to be delivered in 2023-2024.
In the past two years, Zim Shipping has leased many container ships at high prices, and many of them have long-term leases of 3-12 years. Therefore, Alphaliner believes that Zim Shipping’s profit decline in the fourth quarter may be the largest. It is estimated that Zim Shipping’s profit before interest and tax (EBIT) in the fourth quarter will reach 439-739 million US dollars, which is 50-70% lower than that in the third quarter.
For example, in the first half of the year, Zim Shipping leased a new 1900TEU container ship built by Jianhua Shipping in Huangpu Wenchong for a period of 3 years and a daily rent of 36,000 US dollars. Jianhua Shipping’s second ship of the same type was just delivered in November, and the lease period obtained was only 3-5 months, with a daily rent of 15,000 US dollars, less than half of the first half of the year.
In the first half of this year, Zim Shipping firmly believed that the freight rate in the future would still be much higher than before the outbreak of the epidemic, so it was willing to pay a high price for chartering ships. According to Alphaliner's statistics, Zim Shipping has leased 120 existing ships and new ships under construction in the past year, of which 50 ships have a lease term of 3 years, 18 ships have a lease term of 5 years, and 29 ships have a lease term of up to 12 years.
In order to create the highest economic benefits with the least investment, container shipping companies have long established a large enough fleet size through chartering a large number of ships to improve market competitiveness. In the past, the chartering ratio of major container shipping companies was mostly above 50%. In the past two years, with the surge in profits, container shipping companies have increased the proportion of self-owned ships. According to the data of
Alphaliner, among the top ten container shipping companies in the world, 6 chartering ratios are lower than 50%, including 40.4% of Maersk shipping, 45.3% of COSCO shipping group , Hapag-Lloyd 37. 4%, Evergreen Shipping 43.4%, Ocean Network Network Shipping (ONE) 48.4%, HMM (formerly Hyundai Merchant Marine) 32.1%. Among the other four, ZIM has the highest chartering ratio of 94.7%, followed by Yang Ming Shipping with 69.4%, Mediterranean Shipping Company with 54.8%, and CMA CGM with 53.1%.
Since the beginning of this year, Shanghai Shipping ExchangeContainer Freight Index (SCFI) has dropped for 25 consecutive weeks, and the charter market rent has also declined, but the decline has been limited at the beginning. The price is low, so many contracts are signed for a short period of time. Everyone is waiting and watching. On the one hand, they are watching the freight rate trend after the unblocking of Shanghai, and on the other hand, they are watching whether the inflation problem will reduce the trade volume a lot.
Optimistic shipping companies believe that the reduction in inflation will buy luxury goods and high-tech products, and those goods are shipped by air. The new carbon reduction regulations of the International Maritime Organization (IMO) next year will speed up non-compliant ships. Elimination or deceleration of sailing will naturally reduce the actual capacity supply, but some shipping companies are conservative about the future market development.
Among the world’s top ten container shipping companies, Zim Shipping, which ranks 10th, is the mostWe firmly believe that the freight rate in the future market will be much higher than before the epidemic, so MSC has purchased second-hand ships and ordered a large number of new ships. ZIM Shipping has signed a large number of ready-made ships and new ship charters. ZIM Shipping is considered to be the biggest bet , and the industry is waiting to see the final result, now it is clear who wins and who loses.
