So, is the outlook for the Capesize business truly bleak?”
（Text by Hirofumi Yamamoto）
In a room within a building in the sweltering center of Tokyo, a shipping broker began to speak calmly.
Recently, multiple negotiations for time charters of Capesize vessels have been brought to the broker by major shipping companies.
■Shrinking Capesize Fleet
The broker explained:
“The number of Capesize vessels operated by major shipping companies peaked in 2011-2012, a few years after the Lehman Shock (September 2008), reaching around 360 vessels combined for the three companies. Currently, this number has dropped below 290. The decline in long-term charters and hesitation to switch to new fuels have resulted in delayed alternative investments.”
As of the end of March 2024, the number of Capesize vessels operated was as follows: NYK Line had 120, MOL had 78, and K-Line had 86.
Over the past decade, NYK Line has struggled with the losses from high-cost Capesize vessels under long-term contracts signed in 2011-2012.
From last year to this year, purchase options (PO) to buy vessels from owners have come due, leading to the purchase of Capesize vessels under the charter. According to sources, benefiting from the yen’s depreciation, multiple vessels were sold.
The major shipping companies also have their reasoning.
An executive from a shipping company explained:
“The outlook for transporting steel raw materials is uncertain. Steel manufacturers have been announcing switches from blast furnaces, which use raw materials, to electric furnaces, which use steel scrap, to reduce CO2 emissions. Additionally, as a listed company, we are hesitant to invest in new Capesize vessels because we would need to switch to new fuel ships, such as LNG (liquefied natural gas) or methanol.”
Japanese shipowners also have reasons for hesitating to own Capesize vessels.
The Capesize market has seen 3-5 year time charters become mainstream due to the risks of long-term contracts. According to Clarkson Research, the price of a new Capesize vessel as of June 2024 is $76.5 million, significantly higher than $67 million in 2023. Despite being the most expensive among dry bulk carriers, the Capesize market has become increasingly volatile in recent years.
A trading company representative explained:
“Considering the current price of a new Capesize vessel and a five-year charter period, a daily charter rate of around $27,000 is needed. The current spot charter rate is maintained at $28,000, but it is not uncommon for the Capesize market to drop below $10,000. The high price of new ships, the scarcity of long-term contracts, and the market volatility are reasons why Japanese shipowners hesitate to own these vessels.”
■Heavy Fuel Oil-Powered Time Charters
So, is the outlook for the Capesize business truly bleak?
At the international maritime exhibition “Posidonia 2024” held in June, several Greek shipowners overwhelmingly predicted a robust future for the Capesize market.
The leading Greek shipowners, who are the main owners of Capesize vessels, shared their perspective:
“The primary reason for the continued strength in the Capesize market is the low number of new ship orders. As of June 2024, the ratio of new Capesize ship orders to existing fleet capacity is only 6%, compared to 13% for Panamax, 11% for Handymax, and 22% for mega container ships. Additionally, China’s iron ore imports remain steady. If CO2 emissions from blast furnaces can be captured through CCS (carbon capture and storage), some blast furnaces will continue to operate,” said a senior Greek shipowner.
Many of these Greek shipowners are proceeding with new orders for heavy fuel oil-powered Capesize vessels. Regarding the new, more expensive fuel-compliant ships, they commented, “We are a family business and do not feel the same need as publicly listed companies to demonstrate environmental compliance. In fact, with advancements in engine efficiency, optimal route selection, and reducing hull friction, we can meet current environmental standards even with heavy fuel oil engines.”
Recently, some major shipping companies have begun to extend the period of time charters for Capesize vessels to up to seven years.
A Japanese shipowner remarked:
“Major shipping companies are forced to order new environmentally compliant Capesize vessels for their own fleets. Meanwhile, to expand their fleet, they will charter heavy fuel oil-powered Capesize vessels owned by others. Essentially, they will use new fuel for their own ships and heavy fuel oil for time-chartered ships,” said an Imabari shipowner.
In the past, major shipping companies suffered significant losses due to mistimed investment decisions in Capesize vessels. This experience led to the principle of “long-term charter risk.”
However, the global surge in new ship prices has made it difficult to procure Capesize vessels. They now face the dilemma of whether to release the forbidden fruit of long-term charters to lower charter rates or to supplement the shortfall with short-term charters from Greek shipowners.
The complexity of predicting future demand for steel raw materials and the scarcity of new ship orders, a mix of positive and negative factors, makes it challenging for major shipping companies to invest in Capesize vessels.
〆Japanese operators, shipowners がケープサイズへの投資に躊躇している。
〆海運大手は自社保有船については新燃料船を発注、一方、重油焚きは定期用船で確保する。
「ケープサイズへの投資を見送ってきたつけが今になってきている」
酷暑の続く東京中心部のビルの一室で、海運ブローカーが冷静に話し出した。
最近になって、海運ブローカーの元には海運大手からケープサイズの定期用船（Time charter）商談が複数持ち込まれている。