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Vessel Operating Lease Commitments

Vessel operating lease commitments stood at US$877.8 million (2013: US$854.1 million), comprising: US$590.2 million for Handysize; US$244.9 million for Handymax; US$42.5 million for Post-Panamax; and US$0.2 million for tugs.

Our Handysize operating lease committed days decreased 1.8% to 56,560 days (2013: 57,600 days) while our Handymax operating lease committed days increased 34.1% to 19,410 days (2013: 14,470 days).

As part of Other Expenses, the Group made a US$100.9 million provision in the year ended 31 December 2014 for the remaining charter periods of Handysize and Handymax time charter contracts substantially all of which expire in the next five years as the average inward charter rates are higher than the likely average rate for time charter equivalent earnings during those charter periods. The provision will be released back to the income statement in the periods in which the charter payments for these vessels are due from 2015 to 2019.

Year Handysize Handymax US$ Million
Total
2015 12.3 9.0 21.3
2016 13.0 11.5 24.5
2017 10.6 9.4 20.0
2018 10.6 8.3 18.9
2019 9.6 6.6 16.2
Total 56.1 44.8 100.9

The following table shows the average contracted daily charter rates and the annual total number of vessel days of our chartered-in Handysize and Handymax vessels during their remaining operating lease terms by year, assuming the purchase options will not be exercised until the expiry of the charter-hire agreements.

Commitments Excluding Index-linked Vessels

   Handysize    Handymax
     Average daily rate      Average daily rate
  Vessel
days
Before
provision
write-back
After
provision
write-back
  Vessel
days
Before
provision
write-back
After
provision
write-back
Year (US$) (US$)   (US$) (US$)
2015 13,500 9,670 8,760   5,440 11,880 10,230
2016 8,920 10,310 8,850   3,490 12,900 9,600
2017 8,470 10,310 9,060   2,920 12,950 9,730
2018 7,340 10,830 9,390   2,730 12,940 9,900
2019 6,620 10,970 9,520   2,190 12,950 9,940
2020+ 11,710 10,950   2,640 12,810
Total 56,560   19,410
Aggregate operating lease commitments US$590.2m  US$244.9m

2015 Commitments Including Index-linked Vessels

Our fixed, after provision, rate and variable rate index-linked lease commitments showing 2014 completed and 2015 outstanding lease periods can be analysed as follows:

2014 1H2015 2H2015
Handysize Vessel
Days
Average
daily rate
(US$)
Vessel
Days
Average
daily rate
(US$)
Vessel
Days
Average
daily rate
(US$)
Long-term (> 1 year) 10,530 9,690 6,040 8,770 5,690 8,940
Short-term 10,580 8,940 1,770 8,120 - -
Index-linked 11,740 8,110 4,200 Market rate 2,530 Market rate
Total 32,850 8,930 12,010 8,220  
Handymax
Long-term (> 1 year) 3,940 12,530 1,850 10,340 1 ,840 10,710
Short-term 10,710 12,000 1,750 9,640 - -
Index-linked 2,540 9,910 670 Market rate 380 Market rate
Total 17,190 11,810 4,270 2,220  

Index-linked vessel operating lease commitments refer to leases with market-linked variable charter rates. The variable charter rates are linked to the Baltic Handysize Index or Baltic Supramax Index (as applicable) and adjusted – usually upwards – to reflect differences in the vessels’ characteristics compared to Baltic indices reference vessels. Vessels we chartered are typically larger and more fuel efficient than index reference vessels.

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