In today’s container shipping market, the presence of a group of ‘charter owners’ who account for a significant part of the fleet is an accepted part of the landscape. But this has not always been the case; it has taken a number of phases of investment to bolster the capacity of this important part of the boxship ownership spectrum, and in today’s environment it’s worth taking a closer look at the past.
An Equal Share
Container ‘liner’ operators deploy tonnage owned by themselves and also capacity provided by independent ‘charter owners’. In today’s fleet there are 5,126 boxships, and charter owners account for 2,722 of them, equivalent to 53% of the units and 48% of the TEU capacity. However, this wasn’t always the case. Back in the early 90s the liner companies owned 75% or more of the capacity, and the charter market was embryonic.
Phases One & Two
A key driver of change was increased investment in boxships in Germany backed by the ‘KG’ finance system, allowing ship owners and managers to access private investment, offering investors a tax break in the form of accelerated depreciation in return. 285 charter owned ships in today’s fleet were built in 1996-98 (Phase 1), 139 (49%) of them owned by German companies. By 1999 charter owners accounted for 35% of global TEU. Though the benefits of the KG system were eventually limited to tonnage tax gains, the early 2000s saw renewed German investment. Of today’s charter-owner fleet, 700 units were built in 2000-05 (Phase 2), 424 (61%) owned by Germans. This took the charter owner share of TEU to 47% by 2006. Some Greek and Japanese owners had also become established but Germans led the way.
Fast Then Slow
Phase 3 followed. During the great ordering boom, German owners invested even more heavily, swept along by positive sentiment and earnings, as well as the availability of ‘easy’ finance. Of today’s charter owner fleet, 1,113 units were delivered 2006-10, 701 (63%) of them German owned. By 2011, 51% of global TEU was charter owned. But with the credit crunch in 2008, the KG system collapsed and charter owner ordering slowed.
Time For New Phases?
Of today’s charter owner fleet, just 402 units were built in 2011 or since (Phase 4), with only 178 of them German owned (44%). The charter owner share of TEU began to fall. Although others entered the charter owner arena, including Greeks, Chinese and ‘new’ shipping money, nothing as yet has quite replaced the volumes provided by the Germans. Charter owners account for 68% of capacity on order today, but the average number of charter owner ships built in the last 5 years is half the number built in the previous 10.
So, with steady demand growth a reasonable bet, and an apparent gap in the investment profile, market watchers await to see who might step forward. Despite operators focussing their firepower on very large ships, today’s orderbook stands at a relatively modest 18% of the fleet. For investors looking to become a fixture, might boxship charter ownership offer opportunities for new phases?