Ocean Container Business to remain in slump

I know all the carriers have been keeping their fingers crossed, hoping
they were wrong, that things will get better soon. The analysts
are saying it's going to be a while.

Sorry folks.

From The Journal of Commerce

Research analyst says slump could last longer than the 2009 downturn

Container shipping is heading toward a prolonged slump that could last longer than the 2009 downturn, research analyst Alphaliner warns.

Unlike the 2009 recession, which was by triggered by the first fall in demand for container shipping, the current slump results from an oversupply of capacity and weak demand growth in Europe and the U.S., according to Alphaliner.

“The main carriers’ operating margins have slipped this year and the poor operating conditions experienced these days could well last for two more years, given the prevailing oversupply situation.”
Ocean carriers suffered aggregate losses of $19 billion in 2009, according to Drewry’s, a London-based consultant, as container traffic declined 9 percent from the previous year.

The lull in container ship orders between the fourth quarter of 2008 and the first quarter of 2010 reduced the order book from 60 percent to 26 percent of the existing fleet, but did not solve the overcapacity problem, Alphaliner said in its latest weekly report.

Record earnings in 2010 — an aggregate $17 billion according to Drewry’s — helped many carriers to restore balance sheets battered in the 2009 slump while additional capital was raised in the hope of a sustained recovery.

This triggered a rush of orders totaling 2.3 million 20-foot equivalent units since June 2010, which boosted the order book 4.5 million TEUs, or 30 percent of the existing fleet. Overcapacity in the shipbuilding industry is aggravating the problem with carriers attracted by low new building prices, especially in China, Alphaliner said.

The reduction in the idle fleet to just one percent of total capacity masks weak utilization rates through most of 2011. Some industry analysts underestimate container ship overcapacity, based “misleading” supply growth figures of seven percent for 2011 and 2012 and a capacity shortage in 2013, Alphaliner said.