Navigating the Seas of Ownership: Container Carriers’ Strategic Shift Raises Questions

Debates Emerge Over Cost Implications as Liner Companies Increase Ownership in Newbuild Ordering Spree.

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In recent years, container carriers have undergone a notable transformation in their fleet composition, transitioning towards a higher percentage of owned tonnage during the ongoing newbuild ordering spree. However, the potential cost advantages of this strategic shift compared to chartered-in tonnage remain a subject of debate within the maritime industry.

According to Jonathan Roach, a researcher at Braemar, approximately 80% of the current orderbook is now owned by liner companies, marking a significant increase from the historical average of 55% ownership. This shift reflects a concentrated effort by liner companies to invest in newbuildings, thereby minimizing their exposure to the charter market.

Market analyst Jon Monroe characterizes this trend as a “strategic pivot” among carriers, emphasizing an uptick in the proportion of owned vessels relative to chartered ones. Monroe contends that the anticipated capacity surge in ocean shipping lines may not materialize as expected, potentially leading to increased freight rates instead of a decrease.

Contrary to this perspective, Darron Wadey of Dynamar remains skeptical, highlighting that the return of chartered-in tonnage could play a pivotal role in cost control, aligning with broader measures aimed at reducing expenses in response to prevailing market conditions.

Wadey cautions against expecting a collective return of chartered tonnage, emphasizing that returns are contingent on the duration of charter periods and their respective expiration dates. He notes that during the 2021-22 capacity shortage period, shipowners secured longer charter terms, many of which are still in effect.

Moreover, Wadey dispels the notion that operating owned tonnage is inherently cheaper than chartered vessels. With vessels in the current orderbook contracted at high prices and subject to elevated interest rates, the cost advantage of owned tonnage is not guaranteed. Charterers, operating within the same supply and demand dynamics as owners, are likely to adjust prices accordingly.

Wadey recalls the post-2008 financial crisis, where chartered-in ships became more cost-effective to run than owned ones in certain instances, leading carriers to temporarily lay up owned tonnage in favor of operating chartered units. He underscores that such operational redundancy is not indicative of a robust market.

In conclusion, the maritime industry is witnessing a complex interplay between owned and chartered tonnage, with uncertainties lingering over the ultimate impact on costs and freight rates. The strategic decisions made by container carriers during this period of flux will significantly influence the dynamics of the global shipping market.

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