Following the difficulties of 2016, containership market conditions saw some improvements through 2017, and a number of key box sector indicators performed more strongly last year, alongside cautiously optimistic market sentiment. While there remains a long way to go to reach previous highs, comparing the year-on-year change in market metrics illustrates the extent of this improvement.
An All Round Performer?
Following weakening market fundamentals in the second half of 2015, difficult boxship market conditions were experienced throughout most of 2016. During 2016, however, positive changes to the supply-demand balance did begin to be reflected in gradually improving freight market conditions, and in 2017 improvements in vessel charter rates and secondhand prices followed. While market indicators generally remain at fairly subdued levels, even compared to historical averages, the year#on#year variation in key indices serves to highlight the dramatic extent of the improvement seen across the last year or more.
Climbing Charter Rates
The year-on-year (y-o-y) change indicator for the boxship charter rate index (see graph) remained negative throughout 2016, with the index itself dropping to heavily depressed levels not seen since 2010. However, against a backdrop of stronger fundamentals, there was improvement in the rate of y-o-y change from 2H 2016 and through 2017, hitting positive territory in March. While containership charter rates at end 2017 still remained subdued in broader historical terms, there was a clear improvement compared to end 2016, and the rate index finished the year up 35% y-o-y.
Surging Secondhand Markets
On the S&P market, secondhand boxship sales activity reached record levels in 2017, the first year in which over 1m TEU of capacity was reported sold, against a backdrop of improving secondhand prices. Following a similar pattern to charter rates, though with a time-lag, the y-o-y rate of change indicator for the boxship secondhand price index turned positive in Q1 2017 too, and the index finished the year up 54% y-o-y.
Firmer Freight Rates
Meanwhile, a more mixed, but still largely positive, performance was seen on the box freight market during 2017. After appearing to ‘bottom out’ in 2016, on a y-o-y change basis spot freight rates rocketed in late 2016 and early 2017, with the SCFI Index in March 2017 reaching a level almost 90% above that seen one year previously. Although rates eased in the latter part of 2017 on some trades, pushing the y-o-y indicator downwards, full year rate averages generally stood materially above 2016 average levels.
So, while not yet reflective of a return to peak market levels, the year-on-year approach to boxship market metrics shows that the extent of improvement in 2017 was certainly significant. As market players look ahead with cautious optimism, further rebalancing of fundamentals could extend the trend, and maybe drive another year of improving conditions in 2018.
Source: Hellenic Shipping News.