Wednesday, July 29, 2009
Bleak forecast for shipping
Wednesday, 29 July 2009
It is a sign of the depth of the crisis facing many of the world’s container shipping lines that traffic figures released last week by Neptune Orient Linesshowing traffic during June down only 14 percent on the previous year were greeted as modestly good news. For the first six months of the year, the operator of the world’s fifth-largest container ship fleet and one of the most conservatively-run container carriers, had reported volumes down 35 percent on the year before.
However, while there are signs that demand for container lines’ services may be falling less sharply than before, that will do little to prevent further lines having to seek the kind of short-term cash injection Hapag-Lloyd was yesterday seeking from its share-holders. Demand is picking up partly because lines have been forced to drop their charges for shipping each container to levels that come nowhere close to covering their operating costs. They are also suffering from the sheer duration of the industry’s crisis. The long period of rates too low to cover costs means the industry is at risk of losing an aggregate $20bn this year on turnover of about $180bn, according to Mark Page, director of liner shipping at London-based Drewry Shipping Consultants. “Whether or not market conditions are becoming worse, lines’ problems are becoming cumulatively worse,” Mr Page says. The sheer supply of ships is set to remain a severe problem over the next few years, even if the world economy recovers.
According to figures from Paris-based consultancy AXS-Alphaliner, ship deliveries are set to increase the world container ship fleet capacity by an average 11.5 percent in each of the next three years, in a market where demand will this year probably shrink by more than 10 percent. Such figures lead Page to suggest that 2010 could be even worse than this year for an industry which, since it started in 1956, had previously experienced only one year - 2001 - of volume declines against the previous year. The declines now being experienced are the first in the industry’s history on the key Asia-Europe route. “The fleet is programmed to be increased by more than 10 percent next year, so the supply-demand gap is going to get bigger again. It cannot possibly start to narrow until 2011-12.” The grim figures mean that conversation in Hamburg, home not only to Hapag-Lloyd but to many of the world’s biggest container ship-owning companies, is increasingly turning to which container shipping lines might collapse and default on their obligations to the owners, who are paid charter fees for providing the ships. The speculation is mostly that either powerful, rich owners or concerned governments will come to the rescue. Hapag-Lloyd itself is expected to request €1bn in guarantees from the German government as part of €1.75bn in medium-term financing it is seeking.
Source: Financial Times
