The Middle East region continues to escape the slump that has plagued the global container ship charter market since the beginning of the year, according to senior industry analysts and players.

While the year-long slide in global container ship charter rates is accelerating as slower cargo growth on key trade routes and weakening liner freight rates dampen ocean carriers' demand for capacity, capacity in the Middle East continues to surge.

Trade lanes such as Intra-Asia and Middle East as well as Asia to South America and southern Africa routes will continue to soak up capacity for almost all tonnage sizes.

"There is still huge capacity in this region and demand for commodities is growing.

"This has helped to keep the region's container market afloat despite the global slump," said Eivind Grostad, senior vice president and regional manager for DNV Maritime. Globally, hire rates for all ship sizes are retreating with carriers able to negotiate sizeable discounts as owners opt for lower rates rather than risk having their vessels unemployed. Carriers also are deferring charters until the last possible moment because they expect rates to fall even further during the current seasonal slack ahead of the pre-Christmas peak shipping season that gets under way towards the end of summer.

However, rates of shipping containers within and out of the Middle East region have increased by an average of 60 per cent since last year due to increasing capacity and fuel prices.

The average daily charter rate for a 3,500-TEU gearless Panamax ship has fallen to $27,000 (Dh99,000) from $31,000 in May and $33,000 in March, according to Clarkson, the London shipbroker. A 2,750-TEU vessel is earning $22,000 a day, down $8,000 since March, and the benchmark 1,700-TEU geared ship is pocketing $16,000 a day compared with $18,500 six months ago. Current rates have retreated to their 2006 average and are well below earlier years – a 3,500-TEU vessel, for example, earned an average of nearly $38,500 in 2005.

"Carriers also are taking vessels on much shorter charters, typically one year for 2,000- to 2,750-TEU ships instead of the two- to three-year deals common just six to nine months ago because they don't want to be locked into rates that could look expensive in a few months," said Mathieu Philip, Regional Director of Barry Rogliano Salles (BRS) in Middle East.

Reports of cancelled charters and shipyard orders also have depressed market sentiment in recent weeks. Germany's NSB, the world's largest container ship charter owner with a fleet of 87 ships totaling 360,000 TEUs, this month cancelled a $620 million contract for eight 4,250-TEU vessels reportedly because it could not persuade banks to finance ships that didn't have charter contracts. Earlier, Evergreen Line pulled out of a long-term charter for eight 12,400-TEU ships from Greek owner Niki Shipping.

With a flood of large ships of up to 12,000 TEUs about to be delivered from Asian shipyards over the next three years as growth slows on the Asia-Europe trade, charter owners globally are bracing for rates to sink even lower.

But brokers rule out a repeat of the 2001 bear market when charter owners considered a co-ordinated lay-up of idled ships, largely because cargo demand and ship supply are much more closely matched now than seven years ago.

Clarkson forecasts world container trade will grow by 8.7 per cent this year, down from an earlier estimate of 9.7 per cent, while ship capacity will grow by 13.2 per cent. That gap will be narrowed substantially by several factors, including port congestion and slow steaming. Clarkson expects trade will grow 9.6 per cent in 2009, while the world fleet will expand by 12.9 per cent.

While the cargo growth on the major trade routes is slowing — Asia-Europe shipments are expected to increase 10 per cent this year compared with 20 per cent in 2007.