Date: 25th July 2023
Multiple transactions reported that reduce Zim’s market exposure.
Israel-based ocean carrier Zim (NYSE: ZIM) is cutting its exposure to the freight market by offloading multiple leased vessels. News of its divestment strategy was first reported in late June and fresh details are now emerging.
There have been reports this week of at least five charter terminations and sublets by Zim, plus efforts to unload at least four more leased ships. Two of the early charter terminations were confirmed by the vessels’ owner.
Charters terminated early for Euroseas duo
Euroseas (NASDAQ: ESEA) said that charters of its 4,250 twenty-foot equivalent unit Rena P and 4,250-TEU Emmanuel P were terminated by mutual consent, with the vessels rechartered to another ocean carrier starting in August.
The vessels are being redelivered by Zim and taken on new charters by Hong-Kong based OOCL.
The two ships — originally named the Seaspan Manila and Seaspan Melbourne — were purchased by Euroseas from Seaspan for a combined price of $37 million in May 2022, with the charters to Zim attached.
The original charter for the Emmanuel P called for Zim to pay $19,000 per day through March 2025. The charter for the Rena P to Zim was at $20,250 per day through April 2024, then at an index-based rate with a floor of $13,000 and a ceiling of $21,000 per day through February 2025.
The new charters are at $21,000 per day for 20 months plus an option of four additional months.
“These charters are expected to contribute between $2 million and $4 million in additional revenue” versus the terminated charters, said Euroseas CEO.
The Rena P and Emmanuel P handoff was not without hiccups, according to Euroseas CEO. “After having previously failed [to close] the deal, OOCL returned to the market and refixed [the ships]. Consequently, the owners then agreed to terminate the existing charter with Zim.”
Asked whether any termination fees were involved, a Euroseas spokesperson told FreightWaves: “There was no compensation since Euroseas chartered the vessels at higher rates. The termination was agreed upon, not forced. It would only occur if Euroseas managed to recharter the vessels. Otherwise, there would have been no termination.”
Other moves by Zim to cut market exposure
Braemar and analytics group Alphaliner reported further moves by Zim to reduce its market exposure via the subletting of leased ships.
Both said Denmark-based ocean carrier Maersk has chartered the 6,078-TEU Zim Pusan for two to five months at $36,500 per day. The Zim Pusan, previously named the Conti Stockholm, was chartered by Zim in December 2021 for three years at $55,000 per day.
The 5,936-TEU Ian H, owned by Global Ship Lease (NYSE: GSL), is on charter to Zim at $32,500 per day until the second quarter of next year. Alphaliner said the Ian H “has been sublet until the end of her charter to Emirates Shipping Line at $32,000 per day, according to market sources.”
Zim had the 4,258-TEU Volans on charter from Costamare (NYSE: CMRE) through April 2024 at $24,250 per day. According to Braemar, this vessel has just been leased to Germany’s Hapag-Lloyd at $21,750 per day for 11-14 months starting in August.
It was reported on Monday that the 4,250-TEU Zim Vancouver, Zim Shekou, Zim Yokohama and Zim Qingdao were being sold to the world’s largest ocean carrier — Switzerland’s MSC — by current owner Chartworld, releasing Zim from charters of those vessels in the process.
However, Alphaliner said in its weekly report on Wednesday that this transaction has failed. “Whether this deal is completely off the table or might be resurrected at a later stage remains to be seen,” it said.
Zim vows to ‘actively manage and rationalize’ fleet
Zim is the world’s 10th-largest ocean carrier. Unlike other shipping lines, it leases over 90% of its fleet; most carriers own around half their fleet and lease the rest. Zim CFO said during a quarterly call on May 22 that the company operated 138 container ships, with 17 up for charter renewals this year and 27 next year, compared to scheduled deliveries of 40 chartered new buildings during the same period.
In addition to letting charters expire on schedule, early terminations and sublets allow Zim to offset the effects of new building capacity and weaker-than-expected demand.
According to Alphaliner, Zim has the highest order book-to-fleet ratio of any ocean carrier, at 50.6%. “Filling all these extra slots will only be realistic if Zim’s new buildings replace other ships,” it maintained.
Zim slashed its earnings guidance for full-year 2023 on July 12. “We no longer anticipate an improvement in freight rates in the second half of 2023, consistent with seasonality, as previously assumed,” said CEO.
“During this downturn, we will continue to actively manage and rationalize our fleet and services to maximize our cash position,” he said.