As many as 100 more Panamax vessels – containerships with a capacity of 4,000-5,000 TEUs – need to be scrapped before owners see any significant increase in demand and charter rates, according to the latest weekly report from industry analyst Alphaliner.
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Only 88 Panamax vessels currently operate on services that transit the Panama Canal compared with 221 just before the opening of its expanded third lane, according to Alphaliner.
The current “subopex” (below operating expenses) rates being offered by ship owners for Panamax containership charters have failed to move the needle when it comes to demand, according to industry analyst Alphaliner.
The firm said in its latest weekly report as many as 100 more Panamax vessels – containerships with a capacity of 4,000-5,000 TEUs – will need to be sent to the demolition yard before owners see any significant increase in demand and charter rates.
Demand for Panamax charters has plummeted in the past nine months due primarily to the July opening of the expanded Panama Canal, which is now capable of handling vessels with up to 13,000 TEUs of capacity, nearly three times the previous 5,000-TEU cap.
According to Alphaliner, there are currently only 88 Panamax vessels operating on services that transit the canal compared with 221 in June 2016. In their place, there are now 87 vessels with capacity between 5,000 TEUs and 12,000 TEUs deployed on Panama Canal services.
The report noted that 44 Panamax ships have been scrapped in the last four months alone and 130 have been demolished since 2009, but said as much as 20 percent of the global fleet will need to be removed from service for the market to regain equilibrium and shipowners to increase rates.
“Up to one hundred more Panamax ships will need to be scrapped before the segment can regain its footing again,” Alphaliner said. “Ultra-low charter rates, currently at subopex levels, have failed to revive demand for ships in this sector.
“With modern handy Panamax ships of the 4,200 TEU-class, aged between seven and 10 years, now negotiated at prices comparable with the levels obtained by 20-year-old vessels sold for breaking, owners can scrap their older tonnage for around $6m and re-invest into a younger ship that burns less fuel and has lower maintenance costs,” the firm added.