Global Maritime Focus

Special Report

COMMENTARY

By Jeremy Masters

A major dip in the short-term charter market will not happen unless there is a drop in demand in the smaller trades.

There has been consternation in the container shipping industry as to why charter rates have remained reasonably firm when freight rates have been going down.

It is natural to expect that rapidly declining freight rates would cause a pullback in demand for extra ships from carriers and thus put pressure on charter rates.

But the global market is, of course, made up of multiple trades. The ability to redeploy ships means that no trade operates in a bubble, but in the short term at least, each trade has its own supply-demand balance.

Similarly, the charter market has several ranges of ship size and specifications, and the health of various sub-segments can vary.

If we look at the individual interactions between trades and the specific ships required for those trades, we can start to see where the correlations are and why charter rates have remained generally firm up until now.

References to freight rates going down usually refer to high-volume, long-haul trades. These trades are, however, served predominantly by large ships that are either carrierowned or on longer-term charters to carriers.

If we look at Alphaliner’ s regular reports on chartering activity, the biggest size segment regularly reported is 7,500 TEUs to 13,000 TEUs. There has been an ongoing scarcity of these size ships available from non-operating owners( NOOs), and if carriers have a gap in their deepsea coverage for these sizes, they tend to fix them for longer periods. Vessels over 13,000 TEUs are so seldom in the short-term charter market that they are not reported.

Of course, there are some smaller chartered ships in the long-haul trades, but many are operated by the midsize / smaller-sized carriers, and their presence can be opportunistic.

In the trades requiring the biggest ships, the short-term charter market is then of limited relevance and any search for a correlation versus freight rates will be unproductive.

Smaller trades drive demand

If we switch to smaller deep-sea trades, regional trades and feeder trades( the latter two overlapping sometimes) predominantly requiring tonnage in the 2,000-TEU to 8,000-TEU range, there are a wide range of trades, each with its own dynamics.

In these trades, there is a much wider variety of carriers and a higher dependence from both big and small carriers to use the elasticity of the charter market to plug supply gaps in existing services and to launch new services.

There is also a much wider range in the age and efficiency of ships in this segment. The secondhand market is much more active, and the pipeline of newbuildings has been a lot more modest.

What has been pivotal on charter ship supply( and thus price) has been the intervention by carriers— particularly Mediterranean Shipping Co. and CMA CGM— to buy NOO tonnage in the smaller / mid-sizes to operate in smaller trades.

In April, Alphaliner reported that between August 2020 and March 2025, 3.7 million TEUs of NOO capacity was sold to end-users, and the net loss after newbuildings and some small purchases from end-users was 2.3 million TEUs.

Suffice it to say, the supply side of the charter market has become inelastic at the same time carriers have been constrained in their ordering of new tonnage in these ship sizes. The result has been carriers chasing a limited supply of ships on the charter market and resorting to upgrading / downgrading the ship size they would accept, thus explaining why many sub-categories of size have remained firm at the same time.

No disconnect then, just a change in supply that favored a firm charter market.

What will be the catalyst for short-term charter rates in the smaller sizes taking a major dip?

Newbuild orders are going up in the smaller sizes, but as immediate supply remains constrained, a major dip in the short-term charter market will not happen unless there is a drop in demand in the smaller trades.

However, these trades are not immune from what is happening in the larger trades. One of the options for carriers in dealing with overcapacity will be to cascade ships at the lower end of the big-ship capacity range to midsize trades in the next tier, and so on.

This can hit the short-term charter market because more owned / long-termed chartered ships will allow the return of short-term charters. And because of the oversupply of slots, low-rate contagion will also be exported, forcing carriers to reassess participation in trades requiring expensive charters.

The correlation between freight markets and short-term charter markets may become a lot clearer in the coming months then— but in a negative way.

email: jeremy @ shippingmastershk. com

26 Journal of Commerce | December 1, 2025 www. joc. com