Container Ship Costs Seen Gaining on Freight Rates Jump

The cost of leasing container ships will rise after freight rates jumped 40 percent this year, according to Seaspan Corp. (SSW), which owns 72 of the vessels.

Higher prices to ship boxloads of manufactured goods always lead to higher charter rates for the ships that carry them, Gerry Wang, chief executive officer, said March 16 by phone from Vancouver. As operators benefit from the rate increases, they will pay more to owners such as Seaspan, he said.

“Freight rates are increasing like crazy right now, and there’s tremendous positive sentiment,” he said. “When freight rates are good, charter rates always come up.”

After a price war cost $11.4 billion over 14 months, according to SeaIntel Maritime Analysis, operators agreed to raise prices. Box rates climbed 40 percent this year to $1,992 per 40-foot unit on the China-to-U.S. route, according to data from Clarkson Plc (CKN), the world’s largest shipbroker. Rates paid to owners to hire the vessels rose 1.3 percent from the 21-month low reached Feb. 28, data from the Hamburg Shipbrokers’ Association show.

Seaspan’s multi-year contracts protect earnings from market trends, and the Hong Kong-based company hasn’t had customers fail to pay for their charters, Wang said.

Four of the company’s smaller vessels with total capacity of 16,000 units will end their charters this year, Wang said. He said he expects them to find new leases for about $10,000 a day.

To contact the reporter on this story: Isaac Arnsdorf in London at iarnsdorf@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net

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