Reviews and Views

Sea of Troubles

When consumers cut back on purchases, the eventual effect moves down stream over time.  Currently there is a “vast, swelling armada” lying idle.  Nearly 750 vessels are laid up in safe harbors in Asia.  These are all types of shipping – container ships, bulk carriers, tankers, car carrier, and others.  Another 280 ships are being sheltered in European waters.  It is estimated that “nearly 10% of the world’s merchant ships are anchored “because of a collapse in global trade.”

To make matters worse, “there is a huge supply of new ships on order and due off the slipways over the next four years” (2010 – 2013).  President of European Community Shipowners’ Associations estimate than “in June (2009) that shipping capacity would exceed the needs of the market by between 50% to 70% in the near future.”  Box trade (standard containers) is in the midst of its first decline.  It is estimated that “some 15% of capacity will be idle by October (2009).”  For example, “container rates have tumbled:  before last summer it cost $1,400 to move a container from China to Europe; today the rate is barely $400.”  When recovery does come to the global economy, a rapid expansion of container trade may not resume due to over capacity.

This recap comes from an article at The Economist (www.economist.com), “Sea of Troubles”, dated July 30, 2009.

August 8, 2009 - Posted by Bill Wyler | Economy