Something unusual is happening in container shipping right now. Charter rates—the fees paid to lease vessels for extended periods—have been running hot for over a year. Meanwhile, spot freight rates are considerably softer. That disconnect caught the attention of industry veterans during a recent Capital Link shipping sector webinar featuring executives from Danaos Corporation (DAC), Euroseas Ltd. (ESEA), Global Ship Lease, Inc. (GSL), and MPC Container Ships ASA (MPZZF).
The Charter Market Is Locked and Loaded
Sigurd Gjone Gabrielsen, Credit Research Analyst at Fearnley Securities, highlighted just how robust the charter market has become. Vessels are being fixed well into next year and even into 2027. That's not normal.
Evangelos Chatzis, CFO of Danaos Corporation (DAC), confirmed the unprecedented nature of this forward activity. "We are almost at 100% charter cover for next year, and north of 75% for 2027," he said. He couldn't recall a December with this level of advance booking.
Adamantios Catsambis, Commercial Manager at Eurobulk/Euroseas (ESEA), pointed to European liners specifically. They've been aggressively securing smaller vessel capacity several years out, widening the gap between what freight rates suggest and what charter markets are pricing in.
Red Sea Disruptions: A Managed Risk
The ongoing Red Sea situation has effectively removed 10-12% of global container capacity from circulation. Ships are taking longer routes, which means fewer available vessels for the same amount of cargo. The panel didn't view this with alarm, but rather as a managed risk that creates both challenges and opportunities.
Thomas Lister, CEO of Global Ship Lease (GSL), noted the diversion has hit larger vessels particularly hard—those serving the Far East to Europe trades. Catsambis agreed, emphasizing that any return to normal routing will be gradual and measured, not a sudden snap back.
Size Matters: Big Ships vs. Smaller Feeders
The container shipping market isn't one homogeneous blob. Large vessels over 10,000 TEU function as strategic assets on major east-west routes and dominate the orderbook. Midsize and smaller feeder ships in the 1,000-8,000 TEU range offer more operational flexibility, face a much smaller orderbook, and are dealing with an aging fleet problem.
Lister spelled out the numbers: the orderbook to fleet ratio for mid-size and smaller vessels sits around 12-13%, considerably lower than the mega-ship segment. More importantly, the existing fleet is getting old. "There is roughly 6.5% of the existing fleet that is going to hit 25 years or older over the course of the next 3 to 4 years," he explained. Translation: if market conditions soften, there's real scrapping potential.
Strategic Positioning and Consolidation Ahead
Moritz Fuhrmann, Co-CEO and CFO at MPC Container Ships (MPZZF), explained the logic behind their recent newbuilding orders. They secured long-term charters alongside these orders, locking in predictable cash flow while meeting upcoming regulatory requirements with modern, eco-friendly vessels. By staggering employment periods across three to seven years, the company gets exposure to a major discount relative to replacement cost when you factor in the charter income.
Looking ahead, Catsambis sees consolidation coming. Smaller operators with aging tonnage face a tough environment. New regulations are making older vessels more costly to operate, and the performance gap between legacy ships and today's technologically advanced newbuildings keeps widening. Companies that can't afford to modernize may find themselves squeezed out.
The charter market strength tells you that ship operators believe demand will hold up, even as current spot rates suggest otherwise. Whether that confidence is justified depends on how geopolitical disruptions evolve, how quickly capacity normalizes, and whether the aging fleet gets scrapped or finds ways to keep sailing.
Disclosure: Capital Link is the investor relations advisor to Euroseas and MPC Container Ships and works with Global Ship Lease. This content is for informational purposes only and not intended to be investing advice.
