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Gloomy forecasts plague box shipping industry as Jan volumes dive 20pc
2009/3/11
THE collapse of a major container shipping line would "cause a chain reaction of defaults in the industry," according to New York-based Gerson Lehrman Group analysts. Particularly, at a time when cargo demand on the main trade lanes are at historically low levels, record numbers of vessels idle despite more newbuildings entering the global fleet, freight rates have reached zero, and expectations are rife that the economic crisis will deepen in 2009.
However, in the boom years of container shipping operating expenses were said to have "outpaced hire levels in longer-term charters and created pressures on profits... Last year huge increases in bunker expense caused havoc with the large liner operators, who were obliged to put tonnage on slow steaming to contain fuel costs," a tradewinds report said.
"It got to a point that there was an issue about port facilities being able to cope with the envisaged cargo volume from the all the massive fleet expansion plans," it said, pointing out the transported volume plummeted 20 per cent in January compared to the same month a year earlier.
With the situation shifting to the opposite end of the spectrum, many container shipping companies are facing newbuilding orderbooks that are equal to or larger than their existing fleets.
The result, according to the analysts, is that a "majority of containership owners are struggling to pay South Korean shipbuilders after their refusal to countenance demands for delays, price reductions or cancellation of newbuilding contracts."
The spotlight is now focussed on how their counter party charterers will be able to take on and absorb these vessels when a part of their existing fleet is already laid up and the company accumulates operating losses.
Many shipowning companies are suffering losses, too. Seaspan, for example, saw its losses grow from US$10.4 million in 2007, while revenues increased to $229.4 million against $199.23 million the year before as six newbuildings were delivered. The fourth quarter losses were $241.9 million. Their parent company was forced to bail them out by pouring in $200 million through a preferred share deal in January this year.
The question is how long will the container shipping lines be willing to "subsidize the losses and how soon they will start to take measures to contain the losses?" Many are said to have started redelivering vessels, the report added.
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2009/3/12