Laid-Up Container Ships

Tuesday, January 13, 2009

A sharp contraction in world trade has idled more than 200 container ships, threatening the survival of many companies, according to The Journal of Commerce.

"The slump in container shipping appears certain to extend into 2010 or beyond. Some companies won't survive," said Joseph Bonney, editor-in-chief of The Journal of Commerce.

Carriers operating from Asia to Europe, the world's busiest container trade route, are expected to lose up to $5b this year. Additional losses are forecast for 2009.

"This is the biggest challenge the industry has faced since container ships began replacing conventional freighters nearly 50 years ago," Bonney said.

Statistics compiled by PIERS (Port Import Export Reporting Service) Global Intelligence Solutions, a sister company of The Journal of Commerce, show that volume on Asia-to-U.S. routes declined 7.8 percent in 2008. The decline accelerated toward the end of the year as the recession hit full force and retailers cut back on orders. Further declines in trade volume are forecast for this year.

Most of the world's trade in consumer and manufactured goods is carried in containers, which began to replace conventional freighters on international trade routes in the 1960s. Today the largest container ships carry enough cargo to fill 6,000 over-the-road trucks.

The current downturn comes after several years of steady growth in shipping volumes, The Journal of Commerce reports. For container ship lines, the weak volume is aggravated by sharp increase in capacity. During the next two years, shipyards are scheduled to launch more than 100 ships at least twice the size of the largest container ships in service just 15 years ago. With ship capacity exceeding cargo demand, freight rates have plunged on key routes.

"Industry consolidation is inevitable," said Bonney. "The number of container lines could shrink by as much as a third in the next five years, according to some forecasts. Consolidation also is expected among terminal operators, freight forwarders, trucking companies and other shipping-related businesses."


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