• ITVI.USA
    15,913.180
    -35.240
    -0.2%
  • OTLT.USA
    2.793
    -0.005
    -0.2%
  • OTRI.USA
    22.300
    0.290
    1.3%
  • OTVI.USA
    15,900.990
    -35.610
    -0.2%
  • TSTOPVRPM.ATLPHL
    2.950
    -0.570
    -16.2%
  • TSTOPVRPM.CHIATL
    3.610
    0.650
    22%
  • TSTOPVRPM.DALLAX
    1.370
    -0.240
    -14.9%
  • TSTOPVRPM.LAXDAL
    3.550
    0.210
    6.3%
  • TSTOPVRPM.PHLCHI
    2.320
    0.220
    10.5%
  • TSTOPVRPM.LAXSEA
    4.110
    0.250
    6.5%
  • WAIT.USA
    126.000
    0.000
    0%
  • ITVI.USA
    15,913.180
    -35.240
    -0.2%
  • OTLT.USA
    2.793
    -0.005
    -0.2%
  • OTRI.USA
    22.300
    0.290
    1.3%
  • OTVI.USA
    15,900.990
    -35.610
    -0.2%
  • TSTOPVRPM.ATLPHL
    2.950
    -0.570
    -16.2%
  • TSTOPVRPM.CHIATL
    3.610
    0.650
    22%
  • TSTOPVRPM.DALLAX
    1.370
    -0.240
    -14.9%
  • TSTOPVRPM.LAXDAL
    3.550
    0.210
    6.3%
  • TSTOPVRPM.PHLCHI
    2.320
    0.220
    10.5%
  • TSTOPVRPM.LAXSEA
    4.110
    0.250
    6.5%
  • WAIT.USA
    126.000
    0.000
    0%
American Shipper

Drewry: Containership layups “not out of the question”

Drewry: Containership layups “not out of the question”

Drewry: Containership layups “not out of the question”

The container shipping industry “is now going into reverse as the credit crunch impacts all the major economies,” said Drewry Shipping Consultants.

   In a statement accompanying the release of its Annual Container Market Review and Forecast 2008-09, the London-based consultants said, “with the supply/demand balance weakening, the management of capacity will become crucial for carriers over the short and medium terms. Cascading of ships to smaller trades will be a key focus for carriers in the next 18 months and the laying up of tonnage is not out of the question.”

   Neil Dekker, editor of the report, noted that Zim recently announced plans to suspend its EWX service. He said he has not seen layups from carriers “right now, but it is more than likely that this will happen in the current climate and possibly along lines of what has happened in the transpacific trade in the last two winters.”

   Pointing to the fact that 65 new ships in excess of 8,000-TEU capacities will be launched in the next two years, Drewry said carriers “will struggle to find sensible and effective employment. Cascading of tonnage to smaller north/south and regional trades will create new supply/demand imbalances and further weaken rates.”

   Using stock market indices as a barometer of economic performance and sentiment, Drewry said every country/region of critical importance to growth rates of container traffic volumes has suffered a major loss of confidence since the beginning of the year.

   “The Indian market has suffered above average falls and emerging markets (including Russia) have generally had a particularly difficult year. Any sense that some nations could be immune to, or disconnected from, the fate of the western economies seems to have been clearly refuted by developments,” the group said.

   “A slowing down of the Chinese economy, higher levels of inflation and higher production costs will continue to impact the country’s ability to remain the ‘factory of the world,' ” it added.

   “The container industry has always been cyclical and in many respects has proven to be resilient given that the demand side of the equation is governed by global economic conditions,” Dekker said. “Sentiment is now playing a big factor in the industry; barely 12 months ago carriers were making record profits in the Asia/Europe trade but from summer 2008, freight rates on the headhaul market have plummeted and appear to still be in decline.”

   There are pockets of good news, Drewry said, pointing to “strong growth on U.S. backhaul trades to North Europe, the Mediterranean and Asia that has helped reduce container imbalances and repositioning costs. Some routes have seen robust growth including Asia to Mideast and India, West Africa and East Coast South America.”

   Also, “the strategy of slow steaming adopted by container fleets and encompassing global trades will soak up some overcapacity.”

   Another positive for carriers is the increased sharing of high fuel prices on many trades through floating bunker adjustment factors.

“All-in” rates are far less prevalent. And while fuel rates are high by historically standards, Drewry notes bunker prices have come down since July.

   Another bright spot: some air freight is switching to maritime container transport.

   Drewry said, “Cutting unprofitable routes may ease some of the pain, but container businesses have to contend with other negatives apart from falling rates and weakening headhaul demand on all three major east-west routes. It also said there is instability from the termination of conferences in all the European trades.

   Profits in the industry are waning and that instability in the market is “demonstrated by the recent demise of a few minor operators. More carriers may possibly go under if they do not rein in costs,” Drewry said.

   Dekker pointed to Europe West Indies Line, which went bankrupt several months ago, and SYMS, a Chinese operator that ceased to function recently. He noted Grand China Logistics has taken on at least four vessels previously chartered to SYMS, but he said, “SYMS has not been acquired thus far to my knowledge.” ' Chris Dupin

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