Too many new, big ships

CargonewsAsia.com has a very good article, or perhaps it's a commentary, stating the container carriers were just playing "follow the leader" when deciding to order new, much larger ships.

A disastrous game of follow-the-leader has pitched the container shipping business into a deep hole, says Sea Freight Correspondent Paul Richardson

Right now, container shipping is surrounded by doom and gloom and the chilling thought that as winter in the northern hemisphere approaches, there is little in the business to encourage even the most optimistic of optimists.
The whole idea of a market recovery underway seems as far from the truth now as it was six months ago, with a belief in shipping circles that the downturn still has several years to run.
"There is no doubt that the industry is in a mess," was a comment made over lunch by a prominent shipping executive in a plush London hotel last week. It seemed an understatement, but the executive wasn't finished. "We are like lemmings in this business, all intent in rushing headlong into a drowning sea."

I can't help but wonder, why was the lunch in a plush hotel? Shouldn't these guys be eating at the local pub?

Apparently, they still don't "get it".

click here for complete article

Should shipyards quit building ships?

I find it a little strange that shipyards continue to build ships.

I live in the "air capital of the world", and all of the aircraft companies have slowed their production. They have laid off workers, and are shutting down the factories for a week, whenever there is a holiday. Some are considering shutting down from Thanksgiving (late Nov. in the U.S.) until after New Years (Jan. 1).
Why should ship yards be any different. Don't they get it? The demand is just not there.

Apparently not. From Lloyd's List

Keith Wallis - Wednesday 23 September 2009

Reinhard Lüken

EUROPEAN shipyards will start to run out of work in 2011 if the newbuildng ordering drought continues, a top executive at the Community of European Shipyards’ Associations warned today.
Cesa secretary general Dr Reinhard Lüken said the backlog of orders at European yards was fundamentally healthy compared with the rest of the world.

I don't think so.

Wake up and smell the coffee.

The Problem with Bulk Carriers

Yesterday I made a post concerning Dryships, and at the end mentioned you shouldn't be buying this stock.

It's not just Dryships, it's the entire industry. An article in Lloyds List details the problems besetting bulk shipping. It's rather lengthy, so I will try to put it in a nutshell.

Orders were placed for ships, for which there is no longer a demand. But, the ship yards are not accepting cancellations, nor delays in deliveries.

Here's the official version.

THE world’s bloated bulk carrier order book “spells disaster” for shipping markets and could produce “a wave of destruction for banks to rival the sub-prime crisis”, one of London’s most respected shipbrokers forecast on Wednesday.

Howe Robinson’s annual dry cargo report for 2009 appealed for owners, banks and shipyards to urgently and responsibly work together to “re-order” newbuildings and keep shipping solvent over the next decade.

“The newbuilding profile needs putting back in a tube, from whence it can be squeezed out again over many years to come,” the report said.

“If this does not happen the road to recovery will be littered with many more bankruptcies — and they will not just be shipowners.”

The warning comes as many owners remain embroiled in contentious talks with shipyards in Asia to scale back, cancel or delay orders made at the height of the six-year shipping supercycle.

Shipping is in “the eye of the storm” as the global economy and world trade faces its most serious crisis in 60 years, Howe Robinson said.

At the same time there are more than 3,000 bulk carriers on order at 155 different yards in 15 countries by 479 known owners. All are scheduled for delivery by 2011.

“Yards, owners and banks must realise that it’s not going to rosy in the future unless they do something about this,” said one of the report’s authors.