Freight rates are weak — below breakeven in some trades — and show no signs of rising. New ships are flooding the market. And vessel leases that container lines booked at historically high rates during the boom have yet to expire. Some leases run through 2024 or 2025.
They want the new ships being delivered (whether they’re owned or leased) because they benefit bottom lines via much higher fuel efficiency. Aristides Pittas, CEO of ship lessor Euroseas (NASDAQ: ESEA), said during the recent Marine Money Week conference that his company’s newbuildings “burn 40% less fuel oil than similar ships built 10 years ago.”
That leaves the long-term leases of older ships. Losses on these contracts can be mitigated.
I would think those vessels locked into leases at a high rate is a good thing. As those leases expire though it will create havoc with shipping companies bottom line. Those old vessels will be sent to the scrap yard replaced by more fuel efficient vessels.
Those with cargo to ship will be in the cat bird seat.