- As 22 Oil Tankers standby, Waiting to Unload, off Texas in Harvey Aftermath
Leasing companies are tightening their stranglehold over container equipment ownership as ocean carriers cut back on new purchasing and sell older inventory for leaseback, shipping consultancy Drewry said.
But the lessors’ rapid expansion has come at a price as the combination of low borrowing costs and competitive pressures has had an adverse impact on lease rates and accompanying investment returns.
Lease rates slumped to a new low in 2015 and although the improved market climate since has prompted some recovery, they remain well below the long-term average. The pressure on hire rates is not just confined to the dry sector, as reefer and tank leasing rates have suffered in a similar way.
“Dry freight per diems are expected to remain under pressure as the top leasing firms vie for market share, while the underlying initial cash investment return (ICIR) is expected to remain flat. Similarly, we anticipate reefer rate levels to hold close to their recent level,” Andrew Foxcroft, Drewry’s lead analyst for container equipment, said.
As shipping lines cut back, the lease sector ended up taking 54% of deliveries in 2016, expanding its fleet by 7%. The lines’ weaker commitment could be attributed to renewed fiscal problems, which resulted in several high-profile merges being concluded and the bankruptcy of Hanjin, which has further undermined the confidence of the box shipping sector.
“Most shipping lines are again favouring lease instead of direct investment, as it has been the case since the recession of 2009,” Foxcroft added.
“Sale and leaseback is expected to remain a popular option for lessors and lines alike, while leasing firms will also account for at least half of all new container investment through 2017-19. As a consequence, the leasing industry is forecast to maintain its stronger rate of fleet expansion through 2017-19 while transport operators will largely stand still.”
Meanwhile, annual container production fell by 25% in 2016 to reach its lowest level since 2002, excepting the recession blighted year of 2009. Although some increase in production is predicted for 2017, the total is unlikely to match previous years, Drewry said. The trend towards more high-cubes and a bigger share owned by the lease sector looks unstoppable for the rest of the decade.
In the meantime, as of August 28, 22 oil tankers are stranded off Texas coast as they are unable to offload their cargo due to port closures, according to the US Department of Energy.
The tankers are said to be carrying approximately 15.3 million barrels of imported crude oil near Texas ports.
The Port of Corpus Christi remains closed, however, the United States Coast Guard has issued a modified Zulu status for the Inner Harbor to allow for vessels with up to 20 feet draft to operate.
The port entrance has been blocked by a grounded drillship owned by Paragon Offshore and activities are reported to be underway to remove the beached vessel.
The port authority said that work is being carried out on expediting hydrographic surveys of the Corpus Christi ship channel, adding that the Corpus Christi and La Quinta ship channels are not obstructed by the incident with drill vessel Paragon I.
The port authority expects to restore normal business operations by September 4.
Freeport, Galveston, Houston and Texas City ports remain closed as activities ramp up on preparing to receive vessels. Louisiana Offshore Oil Port (LOOP) facilities have reported normal operations.
Six refineries in the Corpus Christi area, seven in the Houston/Galveston area, and two in the Beaumont/Port Arthur area have been shut down due to the hurricane. Five refineries in the Gulf Coast region are operating at reduced rates, DoE informed in the latest update.
Looking at the impact of the Hurricane Harvey on the tanker market, the temporary disruptions of oil production have already caused significant effects on the market.
“The biggest gains so far have been noted in the oil products markets, with the significant cuts in output bringing in a higher demand for commodities such as gasoline (with gasoline futures jumping as much as 7% reaching their highest level in more than two years) as the drop in supply has left many to scramble for new sources,” Allied Shipbroking said.
As a result, there has already been an upsurge in demand and a respective kick-up in freight rates in Europe.
“Product tankers have already started to see a significant amount of strengthening and given that these disruptions are likely to push for longer haul trades to strengthen it should also boost the overall supply/demand balance,” the shipbroker said.
Nevertheless, things have not been as positive in the crude oil trade, with the closure of refineries in the U.S. having also caused a drop in demand for shipments of crude oil.
“The disruption in port operations has also been the cause for the subdued activity being seen in the region over the past couple of days, while it has also taken out some fixing volume from other regions as charterers take a wait and see stance before placing any new orders they may had planned beforehand. The closure of ports surely was the cause for large delays in operations, causing, in turn, a percentage of the fleet for several sectors to be taken out of action,” the shipbroking firm added.
The final impact of the hurricane on the market is yet to be assessed.
World Maritime News
