Container Lines Grapple with Falling Freight Rates and Legacy Leases
Amid weak freight rates and the influx of new ships, container lines like Zim are struggling, looking for ways to reduce their legacy charter liabilities.
Container lines are caught in a precarious situation with weak freight rates, an influx of new ships, and long-term leases from the boom period. Raising freight rates is challenging due to low demand and a lack of sailing cancellations. Despite the profitability of new, more fuel-efficient ships, the cost of older ship leases remains a burden.
To address this, some companies, like Israel-based Zim, are trying to reduce their legacy charter liabilities. Freight rates have been declining again since May, putting pressure on companies' bottom lines. Analyst Jefferies recently slashed the earnings outlook for Zim, projecting significant net losses for the company over the next few years.