Kudo(s) all around …

In times past here was never a shortage of news items about the maritime industry, but things are a lot different nowadays. But no news is not good news in this case – no news is bad news.

The Journal of Commerce produced two stories yesterday about what we’ve been trying to call to your attention. It’s the problem created by those in authority who didn’t see the writing on the wall, or didn’t believe it if indeed they did see it. Stated simply, the problem is overcapacity. Give credit where credit is due, though, because the Journals’s writers, Peter Leach and Joseph Bonney, are lifting some of the smoke laid down by officials some of whom still think that thing’s are just rosy.

Peter began this way: “NYK President Sees Vessel Capacity Outstripping Demand”.

“The supply of container ship capacity will outstrip the growth in demand for vessel space this year and next as more new container ships are delivered in the two-year period, the president of NYK Line warned. In his annual New Year’s message Yasumi Kudo said the tight capacity situation that helped carrier profits rebound last year ‘will not likely recur again for the foreseeable future.’

“NYK’s research group forecasts a 7 to 8 percent growth rate in global cargo movement in 2011 and 2012 and a 10 percent annual increase in container capacity for the same two years as a result of the completion of numerous outstanding orders …

“‘This leaves a widening gap between supply and demand, for which we have to be prepared for some years to come,’ Kudo said …

“Kudo said carriers had to learn to remove capacity from the market when it exceeds demand, which he said was ‘the best solution to achieve stable profits.'” –

And “Super-Size Ships Challenge Capacity Balance, Report Says”, is how Mr. Bonney began his article. “Ship owners and operators are betting their future profitability on super-sized container ships and must delay deliveries of additional vessels to avoid overcapacity and plunging rates, a European shipping bank warns in a research report …

“Balancing supply and demand of super-post-Panamax ships during the next two to three years will require a moderate trade growth, capture of an additional market share from smaller vessels, continued slow steaming to absorb capacity and ‘most importantly,’ further delays in deliveries of new ships, the report said. If owners and operators abandon the ‘pro-active supply management’ that restricted capacity and enabled them to return to profitably last year, the wave of large ships scheduled for delivery in 2011 and 2012 will cause Far East-Europe rates to crash. ‘This will in turn weigh on the entire container shipping market,’ the report said.”-

[‘Pro-active supply management’ will no longer be of any consequence. Those large ships will certainly be delivered and rates everywhere are guaranteed to crash. You can take it to the bank.]