DeTrenck: Container business weakness to persist until 2010

DeTrenck: Container business weakness to persist until 2010 Next year promises to be even more difficult for the container shipping industry than the second half of 2008, said a well-known analyst of the container shipping industry.
   Charles DeTrenck, who earlier this year left Citibank to start the firm Transport Trackers, told American Shipper that 'I want to look for silver linings. But it is too early.' Transport Trackers is a Hong Kong-based independent transport advisory specializing in cargo flows, shipping and related macro trends.
   'I follow China outbound volumes closely and I have never seen such a deceleration of outbound box volumes. But at the moment I also think deflation is coming back in strongly and will lead to a reversal of the growing gap in 2007 and early 2008 between U.S. dollar values and TEU volumes,' DeTrenck said.
   'At the moment I am not saying we are going to get another 1990s 'Wal-Mart effect,' where U.S. consumers buy volume at lower cost. Of course not. But lower costs for manufactured goods will mean lower values per container moved, which will mean East-West lead leg trade volumes will be flat to down a few percent rather than down 15 percent,' he said.
   'Given that capacity planned for 15 percent growth and growth will be about zero, 2009 will likely be worse than the second half of 2008. And 2010 will likely be as weak at the outset given the excess capacity out there,' he added.
   DeTrenck believes 'the negative trend has to continue until scrapping pushes not only 25-plus year tonnage, but newer ships go as well. Owner operators such as OOCL, NOL and others can return tonnage in 2009, so the owners will take the biggest hit.'
   He said the 'silver lining will come in after 2010 when the extent of failed deliveries from the yards is better understood and digested.'
   Will the economies of Asia be able to produce enough regional trade to provide a significant prop to the shipping industry?
   De Trenck said regional China trade volumes have slowed significantly, and cited an estimate from one port official that half of China domestic boxes were linked to the construction industry.
   'China short term will need more than infrastructure spending to kick-start a rebound,' he says. Intra-Asia shipping 'in general, should be a derivative of long-haul trades, so don't expect any spectacular performances there.' ' Chris Dupin