Idled Threat

Dun & Bradstreet is projecting a dismal future for container shipping lines. According to a report from D&B Germany, twenty top container lines have incurred a combined loss of some $ 4 billion in the first quarter of 2009.

D&B has estimated that by year-end, the shipping industry is likely to accumulate a combined loss higher than the airline industry unless freight rates can be increased. This raises the question of insolvency, and D&B wonders who can, and will, survive this dramatic tonnage downturn.

D&B’s Economic Advisory Board warns that some carriers may be driven into bankruptcy with ships being arrested as a consequence. It was further noted that the costs and delays associated with the release of cargo from an impounded vessel can be considerable.

As offsetting measures, D&B reports that there are extensive efforts being taken by carriers, such as laying up vessels in the 1,000 – 3,000 TEU range, returning chartered vessels upon expiry dates, scrapping older ships, consolidating routes, and even aligning their services to maximize loads.

Service reductions and containership lay-ups are expected to become more pronounced in September and October as the exceptionally weak peak season draws to a close. These capacity reductions closely follow three cutbacks, including the 20 percent reduction in CKYH Alliance capacity on the Far East-to-Europe run. Beginning in October CKYH carriers (Coscon, K Line, Yang Ming and Hanjin Shipping) will remove 18 ships of 5,000-TEU or more from service. There are also reports that Maersk Line, CMA CGM and Hyundai Merchant Marine are considering the suspension of their joint Far East-US East Coast service on which 5,000-TEU vessels are deployed.

Numbers in the idled fleet are being kept at fictional low levels because deliveries of an estimated 100,000 TEUs of completed vessels have been delayed in shipyards in order to avoid being listed as idled capacity.

None of this is cause for alarm, of course. “There’s nothing to worry about”… “All these recessions end eventually”… “It’s the nature of things.” In fact, economists are already seeing signs of a “turnaround” – a “recovery” – a “bottoming out”. In due time, however, people will realize that those inane comments were just smoke – that economists have found no way to end this free fall.

Prior to this “Great Recession” the economic lifeblood of very one of the G20 nations was being nourished by the buying power of the American consumer, and anyone who denies that is either a liar or an ignoramus. There will be no end to this worldwide economic devastation until U.S. workers are gainfully employed. And unless someone in charge realizes that and takes steps to revitalize our shipyards – and consign climate change, and cap-and-trade scams to the scrap heap – we’ll be standing in line again for milk and cake flour handouts at WPA distribution centers.

Been there. Done that. And we wouldn’t wish that kind of an existence on our worst enemy.