Euroseas is holding back on scrapping any older container ships, although it has a bleak market outlook for nine newbuildings that it plans to receive over the next two years.
The New York-listed owner of 10 feeder boxships and eight intermediate boxships expects charter rates to “decline significantly” in 2023 and 2024 as a result of multiple negative market fundamentals, chief executive Aristides Pittas said.
“We expect the remainder of 2022 to remain strong, but in 2023, increased deliveries, easing of port congestion and demand destruction should take their toll and charter rates should decline significantly,” he said to analysts on Thursday during a second-quarter earnings call.
“Of course, everything will depend on how the market develops, so we’re not taking any decision now about what we’re going to do in 2024.”
The owner has ordered the nine newbuildings over the past 13 months, the latest being two 2,800-teu feeder ships that it ordered for $86m in May from Hyundai Mipo Dockyard.
Pittas said Athens-based Euroseas wants to see first if its gloomy market forecast comes to fruition in 2023 and 2024 before taking older ships to the scrapyard.
Euroseas’ fleet, built between 1997 and 2009, is chartered at least into early next year to mid-2026 at time charter equivalent rates ranging from $16,800 per day to $65,000 per day.
“If at that time the market is terrible, then probably we will scrap them,” he said.
“If the market is still holding well and the ships are passing the next survey and can still contribute, we will keep them. It’s a decision for the future, not for now.”
The container ship market has boomed in the past couple of years due to Covid-driven supply-chain disruption, but it has cooled off in recent months as rising inflation hurt consumer demand.
The Baltic Exchange’s Freightos Baltic Index soared to more than 11,000 points last September, but it has since declined steadily to below 6,000 points.
However, Pittas noted that the market is still at historic highs, having allowed his company to book a record $30.7m profit for the second quarter.
