Container-Ship Owners In Crossfire As Liners Slash Service
Container-ship lessors represent one of the most crowded segments in the U.S.-listed shipping arena – and one of the most highly leveraged to COVID-19. Such owners, known as "tonnage providers," lease vessels for varying lengths of time to liner companies, which use chartered ships to complement their owned fleets. If global consumer demand rebounds robustly, stocks of tonnage providers should surge. If there's an extended downturn, they face years of pain. Liners have heavily "blanked" (canceled) sailings to cut costs and prop up freight rates in the wake of lower consumer demand. The longer fleet capacity exceeds coronavirus-reduced demand, the more likely that liners will permanently reduce fleet size by letting expiring charters roll off without renewal, and possibly even seek to renegotiate rates on long-term charters. As IHS Markit (NYSE: INFO ) Director of Transportation Consulting Paul Bingham recently told FreightWaves, "The whole reason carriers deliberately have a portfolio-management strategy [fleets partially owned, partially chartered] is that you don't want to get stuck with a 100% owned fleet at a time like this.
Container-Ship Owners In Crossfire As Liners Slash Service
Container-ship lessors represent one of the most crowded segments in the U.S.-listed shipping arena – and one of the most highly leveraged to COVID-19. Such owners, known as "tonnage providers," lease vessels for varying lengths of time to liner companies, which use chartered ships to complement their owned fleets. If global consumer demand rebounds robustly, stocks of tonnage providers should surge. If there's an extended downturn, they face years of pain. Liners have heavily "blanked" (canceled) sailings to cut costs and prop up freight rates in the wake of lower consumer demand. The longer fleet capacity exceeds coronavirus-reduced demand, the more likely that liners will permanently reduce fleet size by letting expiring charters roll off without renewal, and possibly even seek to renegotiate rates on long-term charters. As IHS Markit (NYSE: INFO ) Director of Transportation Consulting Paul Bingham recently told FreightWaves, "The whole reason carriers deliberately have a portfolio-management strategy [fleets partially owned, partially chartered] is that you don't want to get stuck with a 100% owned fleet at a time like this.