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The Red Sea Crisis Boosts Secondhand Container Ship Prices and Freight Rates

Since the beginning of this year, prices for secondhand container ships of almost all subtypes and ages have risen significantly.

After reaching a record peak at the end of the first quarter of 2022, secondhand container ship prices steadily declined. However, since January 2024, prices have risen again, with particularly notable increases for older vessels. For instance, the price of a 20-year-old, 1750 TEU (twenty-foot equivalent unit) versatile container ship has grown by 43% from $6.99 million to $8.6 million since the beginning of the year.

Throughout this year, rising freight revenue has supported the growth in vessel asset prices. For example, the earnings of versatile ships have surged from $9,280 per day on January 1, 2024, to the current $12,940 per day, representing a 39.4% increase. This change is largely attributed to the ongoing tension in the Red Sea region. Ships have been forced to divert from the Suez Canal route, resulting in longer voyages and reduced available capacity, which in turn has driven up freight rates. According to data from VesselsValue, container shipping volumes via the Cape of Good Hope route increased nearly 200% in the first quarter of 2024 compared to the same period in 2023.

However, Veson’s Market Outlook’s latest forecast indicates that despite the continued conflict in the Red Sea area, the supply of vessels will continue to exceed demand due to the increasing delivery of new container ships into operation. This oversupply is expected to put downward pressure on freight rates. In recent years, MSC (Mediterranean Shipping Company) has shown no signs of slowing down its pace in purchasing secondhand container ships, accounting for almost a quarter of all secondhand container ship transactions so far this year. Notable transactions include the sale of the post-Panamax vessels Buxcoast (6,892 TEU, built by Daewoo in August 2001) and Buxcliff (6,892 TEU, built by Daewoo in June 2001) for $22.5 million each, with VesselsValue estimates of $20.01 million and $19.95 million, respectively. Similarly, in March, the Panamax vessel Odysseus (2,824 TEU, built by Hyundai Mipo in 2006) was sold to MSC for $15.9 million, with a VesselsValue estimate of $13.61 million.

Image source: CN.NYTIMES.COM