Top Container Lines Lean Towards Ownership Over Chartering

HMM is among the carriers most invested in owning its fleet (HMM file image)

At the outset of the pandemic, ocean carriers chartered-in the majority of their tonnage, giving them the flexibility to grow or shrink their fleets as needed to match demand. That capital-light structure has now reversed itself: on average, the 12 largest ocean carriers now own the majority of their operated capacity - about 63 percent of all slots in total, according to Sea-Intelligence.

The decision to build or charter-in varies by container carrier, and each has its own strategy. Israel's ZIM is well known for securing almost all of its tonnage on long-term charters rather than buying or building its own hulls: it only owns about 15 ships, and it charters-in the remaining 101 ships in its fleet. At the other end of the spectrum, Wan Hai has recently eliminated all chartered tonnage from its operations and now owns its entire 124-ship fleet. MSC, HMM and Evergreen are likewise heavy on the ownership side of the equation.

MSC's post-pandemic buying spree is one explanation for the average number shifting in favor of ownership. During the early 2020s, MSC developed a reputation for buying used tonnage at healthy prices, and it has ordered newbuilds at a swift pace. It now dominates the field in both TEU capacity (7.3 million TEU afloat) and vessel count (more than 1,000 hulls). The number-one container carrier has purchased so many ships that its owned fleet alone is larger than the combined fleet of its next-largest competitor, Maersk Line, and it continues to grow. In June, it was linked to orders for another 20 vessels of 20,000 TEU each at Hengli Heavy Industries, bringing its orderbook to about 2.6 million TEU.

Other big movers who have swung towards ownership include CMA CGM, PIL and Evergreen, all of which now own a majority of their fleets.

The advantages that accrue to carriers with a high owned percentage of tonnage center around predictability and control, both operationally and on the balance sheet. Owned vessels are not exposed to fluctuations in the charter market, like the extreme price surges seen during the pandemic. Carriers with owned ships do not have to worry about a bidding war at the end of a charter term, nor do they have to ensure that they meet the shipowners' specifications for maintenance, trading area or any other operational factors. This leaves the carrier with more flexibility and more assurance when planning service strings, and greater ability to capture peak earnings when container rates begin to climb. When a boom market arrives, an owned vessel is an available vessel - even when the chartered vessels get snapped up by somebody else.