How bad is it, really?

How bad is it, really? On Second thought' By Tom Timlen

      'The capitalist system has collapsed and must be replaced.'
      'The overcapacity of the merchant fleet as markets collapse will cause widespread newbuilding cancellations and shipyard failures.'
      'Increasing economic hardships will result with an increase in piracy and armed robbery in areas where such activity had been curtailed.'
      At the end of last year there was no shortage of such doom-and-gloom statements. In the face of such dire predictions it is reassuring to note that today the many stimulus packages launched around the world have helped to avoid a complete financial meltdown, the number of new ship delivery postponements far outnumber the number of cancellations, and there has not been a drastic increase in attacks against ships.
      In some quarters there was even a sigh of relief as it was realized that the impending shortage of able and trained seafarers was put off, albeit only temporarily, until the global markets pick up again and the many laidup ships come back on line. So enjoy the respite while it lasts, this is a challenge that we will have to be deal with soon.
      Now, as 2010 approaches, looking back on the upheavals experienced in the global economy since the latter part of 2008, it is easy to understand that few are making definitive predictions as to when the global recovery will truly take hold. Whether one should be encouraged or dismayed often depends on the indicators and sectors that one is looking at, and there are quite a variety of indicators and sectors from which to choose.
      Yet, within each category there are differing trends and developments. Looking at container throughput, for example, Singapore saw a 5.6 percent increase between June and July, welcome news for many searching for signs of recovery. At about the same time Malaysia reported an increase for its exports of 5.1 percent in June as compared with May.
      On further examination, however, we learn that July's container throughput in Singapore is down 10 percent as compared with the same month one year earlier, and Malaysia's exports in June were 21 percent lower on the same basis. So even the good news comes with a dose of sobering reality.
      In an effort to assist the shipping industry in keeping abreast of how such economic developments impact our business, BIMCO has initiated regular shipping market analysis reports, complementing its broad portfolio of information services.
      In one early analysis, BIMCO found an interesting advantage created by a most unpopular maritime risk, the piracy attacks off Somalia. As it turns out, depending on factors such as a ship's fuel consumption and insurance, it may be more profitable to transit via the Cape of Good Hope instead of transiting via the Suez Canal and Gulf of Aden. Who would have thought profits could be enhanced by routing a ship at a safe distance from potential attackers?
      Have there been any other reasons for cheer? These days news that national contractions in gross domestic product were lower than feared is welcome with a modest degree of delight. In this way bad news is delivered as good news, yet we have also seen the reverse situation. Countries that have begun to show signs of tangible growth are hobbled by the spectre of unemployment figures creeping upward. No one said the recovery would be easy, no matter what corner of the world you may be focused on.
      But were all economies contracting? Hardly. Indonesia experienced 4 percent growth in the second quarter, a rate reportedly at the slowest pace in six years however exceeding predictions for 2009. Indonesia is one of the few countries in Asia reporting positive growth, attributable perhaps in part to growth driven by domestic demand rather than a reliance on exports. Meanwhile, the Philippines avoided falling into recession altogether, with GDP performing at its strongest rate since 2007.
      Still, times are hard for the container lines. The sector facing the most dire levels of overcapacity saw companies reporting falling volumes and substantial losses.
      Owners in the bulk sector saw some encouraging developments. Take for example Hanjin Shipping's 20-year deal with Korean steelmaker POSCO worth $1.1 billion.
      In the offshore sector contracts worth $85 million have recently been secured by Keppel Offshore and Marine, and as far as the yards go orders are being fixed for rigs and bulkers at handsome rates.
      Where conventional orders are hard to come by, the creative thinking of the yards may even help to reduce the world's greenhouse gases.
      Daewoo Shipbuilding & Marine Engineering Co. has acquired an American wind turbine producer. The opportunities created in clean energy industries are ready for steady growth as global climate change remains a priority issue. And as several yards begin to compete in this field such equipment may become more affordable and widely deployed.
      At the end of the day the market upheavals and eventual recovery will have varied impact depending on the region and sector of business. Far from being the end of capitalism, a disaster for the yards and a return to mayhem on the high seas, the actual outcome may simply be what was mentioned many months ago; a necessary and long overdue adjustment for all markets ' freight included. The experience will hopefully provide many valuable lessons, not only with respect to creative thinking and innovation that is required when faced with such challenges, but also with regard to our abilities to run sustainable businesses in this globalized marketplace.
      Now that's not so bad, is it?