Is long period time charter still a viable option in today's market condition (with focus on panamax vessel from shipowner perspective)

Abstract

Strategic fleet planning remains a crucial tool for shipowners to achieve financial target and overcome uncertainties in today’s volatile dry bulk market. Current researches only focus on the strategic fleet planning of liner industry; therefore, this report aims to bridge the gap by investigating the importance of four factors namely Commodity’s Demand, New Orders and Deliveries of Panamax, Demolition of Panamax and Current Fleet Size of Panamax in affecting the spot rate of Panamax vessel. Subsequently, future Panamax spot rate was projected to determine the viability of long term time charter in today’s market condition. In term of methodology, Triple Exponential Smoothing and Linear Regression were deployed to forecast the trend of all four factors and the Baltic Panamax Index to attain future trend of long term time charter hire rate. The results revealed that long term time charter hire for Panamax has to reach US$ 22,000/day, a premium of 37.5 percent over current time charter hire of US$ 16,000/day in order for shipowners to be profitable. Given the volatility and uncertainty of Panamax market, it is advisable for shipowners to maintain a portfolio that consists of both long term time charter and spot charter in order to remain competitive in today’s market condition.