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Thursday, April 16, 2009

Shipping awaits consumer rebound

Thursday, 16 April 2009

Only a surge in consumer confidence can restore international trade after the severe downturn in demand in container shipping, a top executive of the Arab world’s largest shipping company says. United Arab Shipping Company (UASC), which is jointly owned by six Gulf countries, said it had not been immune to the downturn, which has seen container volumes fall as consumers globally have cut back spending because of the recession.
Consumer goods typically make up 75 per cent of container traffic, mainly originating from Asia to the US, Europe and the Middle East.
“We live on consumer confidence, like it or not,” said Jorn Hinge, the deputy chief executive and chief trade and operating officer for UASC in Dubai, which operates a fleet of 41 container ships.
“I’ve been in shipping longer than I care to remember and I’ve never seen anything like it. All the industry is bleeding right now.”
Global volumes could fall for the first time this year, by 4.5 per cent, according to Drewry Shipping Consultants.
Shippers have responded by reportedly laying-up 11.5 per cent of the global fleet of container ships to await a market recovery.
Mr Hinge said his biggest hope was for the public to start buying again.
“That will only happen if consumers feel happy that the financial crisis is over, that they don’t feel threatened, and they start spending money again. But I don’t think we are there yet,” he said.
The post-holiday season is traditionally the slowest period for trade between Asia and the consuming nations of North America, Europe and the Middle East. However, the industry has also been hit by the global slowdown and recent pirate attacks in Somalia, which have raised insurance premiums for shipping lines that pass by the Gulf of Aden.
“Shippers always hope to find the hot trade, but there are very few hot trades right now,” he said.
The UAE, where a booming construction industry has kept shippers busy for the past five years, is also facing uncertainty.
The market for shipping goods such as fixtures, furniture and carpeting was falling, Mr Hinge said.
The company hopes the market will recover by 2011 and the credit crisis will improve to ease the transition of nine supercontainer ships scheduled to arrive then. The Dh5.5bn purchase from Samsung Heavy Industries was said to be the largest Gulf ship order in history.
Source: The National