Posted on 01/14/2009 9:30:38 PM PST by Vince Ferrer
This year will be the toughest test yet for the global container shipping industry and further casualties among operators are a real possibility, according to Drewry Shipping Consultants, which issued the warning in its latest quarterly Container Forecaster.
The London-based consulting firm said long-held industry rules have changed or become skewed because the downturn happened so dramatically that the existing supply-demand mechanics in all trades have faltered at the same time, leaving no bright spots for the industry.
Four container operators, including China's SYMS and SA Independent Liner Services of South Africa, failed in late 2008, Drewry said.
Although carriers have been reducing capacity through suspension of a number of high-profile east-west services, Drewry says that the gap between supply and demand is still too big.
Drewry says that for the short- to medium-term, carriers can at best only stabilize freight rates that, on the Asia- Europe trade, have recently fallen to unprofitable levels.
Drewry has revised its estimate for 2008 global container traffic growth to 152.8 million TEUs, up 7.2 percent on-year, down from growth of 8.6 percent in its September report.
It projects meager expansion of 2.8 percent for 2009, which it said is backed by the year-on-year throughput decline currently in evidence at the southern China Port of Shenzhen.
The relationship between volume growth and expansion of Gross Domestic Product has also become distorted, differentiated charter rates currently do not exist and freight rates are being determined by factors other than simply falling demand. Further, carriers and alliances are seeking vessel-sharing or service-sharing agreements they would not have contemplated 12 months ago.
Carriers' slow-steaming strategy to save fuel costs has also been turned on its head by falling crude prices. East-west strings are now being operated by 10 and 11 ships with extra port calls being added, just to soak up capacity.
While this was mainly confined to the Asia-Europe trade, carriers are now desperately seeking any means to utilize capacity without physically laying up vessels.
“Shipping lines and shipowners are in a precarious position since they can do almost nothing to determine freight rates, charter rates and asset values for their ships,” said Neil Dekker, editor of the Container Forecaster. “Even at such low prices, it is not a buyer’s market for potential charterers or ship purchasers because demand and credit lines have dried up.”
With no likelihood of significant cancellations of orders for new ships in 2009, the global fleet is still expected to increase by 12.7 percent -- way ahead of demand.
“Even with some tonnage taken out of the market in 2010-12 through cancellations and increased annual slippage factors playing a part, this is not helping the global supply-demand balance to any significant extent,” said Dekker. “Our supply-demand index forecasts for the next four years are now very pessimistic, indeed, and it is expected to fall by 7 percent this year and by a further 3.6 percent in 2010.”
Dekker said there are very few positives at the moment apart from the fact that bunker prices have greatly reduced and scrapping levels have increased. Carriers are continually re-assessing their capacity deployment strategies as it seems that the recent suspension of a number of east-west strings is still not bringing supply-demand balance back into line in order to stabilize erosion of freight rates.
The lay-up of ships is a last course of action for the industry, but it will become more of a feature throughout 2009 as cascading of tonnage can no longer be seen as an effective capacity management tool.
The longer the recession lasts, the more obvious it will become that to revive the job market, we need to start moving the manufacturing that we outsourced to other countries back here. This realization will be the death of the global logistics economy, and the painful birth of a new model of trade.
Agreed. Much pain is needed, though, to chase vanity away.
I agree. Our country needs to be more friendly to those manufacturers this time around, with NO unions.
They can use the unused containers to house the homeless durring the coming depression.
Our government’s new slogan for container houses:
“Live in a metal box while waiting to be put in your wooden box.”
Freight rates for containers shipped from Asia to Europe have fallen to zero for the first time since records began, underscoring the dramatic collapse in trade since the world economy buckled in October.
Good idea. We can call them Obama Cottages.
They do make housing out of old containers, as you probably know. It actually isn't a bad idea to get container housing these days, because if you have to move to keep working, you can ship your house anywhere the jobs are.
I now long for one here in Sudan, there are a few that strangely enough are utilized for shipping of all things, and I get misty looking at them.
Should I seek competent psychiatric intervention?
or just up my medication on my own?
A real shipping container or one of the white shoeboxes? I spent 18 months in a converted 40' container. It had a bathroom, internet, and VoIP (NIPR) DSN line. We also had our own trucks and preferred Johnny Walker Black (from BIAP) when sitting around our campfire in the evenings. Everyone hated us : ) There were only so many of us in the 'real containers' on Victory. In which case I must wonder if you are really from the Privelidged Class? ; )
But nobody ever accused me of having class, privileged or otherwise
The homeless might be us....
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