Idle box ships are a better option than cold lay-up

Speaking at a conference on laying up ships, held at the London headquarters of IMarEST, Mr Dowell said that despite the already massive fall in containership charter rates and growing oversupply, it was still worthwhile for owners to keep idle ships ready to resume trading.
This is despite charter rates plummeting from their peak down to close to or below operating costs. Using an example of a 1,700 teu vessel, based on estimated lay-up costs of US$700,000 a year, he calculated that charter rates needed to fall from the current US$4,750 a day down to US$3,700 a day to justify putting ships into cold lay-up. Similar estimates apply to larger ships.
One problem for owners in making the decision for long-term lay-up is the lack of reliable estimates of lay-up costs and the costs of re-activating modern vessels following a period out of service.
In this context, he said that although there were a large number of boxships lying idle around the world, amounting to about 10% of the fleet, few had been placed in long-term lay-up.
However, Lloyd’s List understands that a quartet of soon to be delivered 7,000 teu ships will go straight into cold lay-up.
Mr Dowell’s prognosis is bleak: “There is a delivery time bomb with no realistic prospect of demand absorbing the tonnage on order. This is the first time that boxship demand growth has been negative. The severity of the problem cannot be overstated.”
This had severely affected ship values. For example, he estimated that a panamax containership ordered at the market peak last year had seen its value halved.
There had been no new boxship orders placed since September 2008. As a result, capacity on order has eased to 45% of the boxship fleet in service.
Mr Dowell said there had been some delays to deliveries, a handful of confirmed cancellations and some older ships consigned to scrap.
But even allowing for these, cumulative oversupply of containership capacity would reach 3.5m teu in 2010, before gradually subsiding, assuming no more ships were ordered for delivery before 2015.
This meant a potential lay-up pool amounting to some 25% of the current fleet.
“It will be 2014-2015 before market equilibrium is restored,” said Mr Dowell.