Breaking News

High spot rates offer opportunities for smaller vessels

carriers

Port congestions in more locations become favourable for smaller carriers

The risks involving economies of scale once again raised its ugly head. With the Omicron variant disrupting supply chains, cargo owners banking on lower costs with big carriers may wind up suffering more losses. The result might just be different if shippers go small.

Leveraging high spot rates
The industry experienced horrendous port congestions in H2 2021 – ever since COVID-19 cases hit record highs, and left port managements hoping spot rates to soften after the Chinese festivities. Ports in New York and New Jersey are now congested, apart from Los Angeles prior.

However, bullish spot rates have resulted in cargo owners reconsidering their charters. Based on what was deemed another record for charter profitability in Q4 2021, Drewry Shipping Consultants upgraded its cumulative liner profitability guidance from US$150 billion to US$190 billion. This hike is propelled by the Omicron which continues to disrupt supply chains. Drewry therefore noted a new wave of contracts to emerge for the purpose of cushioning the impact of high spot rates.

Market sources have disclosed smaller carriers are offering space on short-term deals at very high rates; while big carriers mostly decided to secure long-term and multi-year contract deals with high volume shippers, featuring significant year-on-year rate hikes. That would only make financial sense if the pricey short-term contracts are still more cost-effective than the big liners with long-term and high volume agreements.

This proposition was confirmed by a carrier who revealed to a media that they have deliberately placed contract signing with cargo owners with lucrative spot market rates on the backburner. The carrier said it decided to “wait and see” on some deals as it did not want to be bounced into committing too much space to contract business, when it may get double the revenue from the spot market. It added, “If we leverage the very high-rated cargo we are being offered on a daily basis, one of the growing number of ad-hoc players that have come into the market will fill their boots.” For cargo owners seeking cost-effective charters, they can look to Marine Online’s extensive list of smaller vessels available at 0% commission.

Marine Online News Team
Please email us at marketing@marineonline.com to contact the author for this article.

Chartering banner

Check Also

Hydrogen may follow as the next marine fuel after LNG and ammonia

Korea demonstrates its high ambitions in net zero fuels While hydrogen is a clean fuel, …