Bloomberg News

New Container Ships Fall 31% in Value as Rents, Economies Cool

November 07, 2011

Nov. 4 (Bloomberg) -- New container ships’ value dropped as much as 31 percent since April because of falling hire costs and cooling economies, according to Seasure Shipping Ltd.

Post-panamax vessels that are too large to navigate the Panama Canal are worth $73.2 million, below a peak of $106 million on April 13, according to Seasure’s VesselsValue.com unit. It tracked the value of the global fleet of 4,767 container vessels from the beginning of 2009. New post-panamaxes were worth the least in May 2009 at $45.9 million.

The drop followed market indexes that peaked in April before sliding on concern slower economic growth may curb demand for consumer goods, Adrian Economakis, lead research analyst at London-based shipbroker Seasure, said by phone. Container shipments into five U.S. West Coast ports fell for a fourth month in September, figures compiled by Bloomberg showed.

“Like the market, these falls in price are driven not necessarily by fundamentals, but by fear and uncertainty,” Economakis said. “Fleet oversupply means many German owners are also under a lot of financial pressure as well, and there’s a lot of demand for forced sales. That’s been pushing prices down too.”

Declines in the last few months were similar for any new container ship able to haul between 2,000 and 10,000 20-foot boxes, VesselsValue.com data show. Panamax vessels worth $51.4 million this month were valued at $74.4 million in April.

19-Month Lows

A glut of ships, high fuel prices and weakening U.S. and European economies are curbing freight rates as charter costs at 19-month lows depress vessel earnings. Still, global demand for consumer goods shipped in containers will gain 8.3 percent in 2011 as rising imports to Latin America and other developing economies offset slowing demand in the U.S. and Europe, according to Clarkson Research Services Ltd., a unit of the world’s largest shipbroker.

The 12-month hire cost for a panamax container ship declined 55 percent in seven months to $12,750 a day in October, the lowest level since March 2010, Clarkson data show. Charter costs of $28,500 in March of this year were the highest since June 2008.

Falling values are adding pressure on German owners of container vessels who already face difficulty earning enough to cover interest and principal payments on ship loans, Max Johns, Hamburg-based spokesman for Verband Deutscher Reeder, the German association representing shipowners, said by phone.

About 36 percent of the global container-ship fleet is German-owned and rented out, Johns said. Many banks that delayed principal payments and granted other waivers to avoid ship- mortgage foreclosures during an industry-wide downturn in 2009 are now forcing sales or seeking additional equity or alternate loan collateral, he said.

--Editors: Dan Weeks, John Deane.

To contact the reporter on this story: Michelle Wiese Bockmann in London at mwiesebockma@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net


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