This is what Juliette Jowit reported about “Containers & Markets” in the FINANCIAL TIMES a little while ago:

“Container profits sunk by new wave of superships”

“Ship owners are facing an age-old problem, a wave of new capacity at a time of sinking demand. Container shipping rates on the main routes continued to fall in the second quarter, according to figures to be published by Containerisation International.

“The latest declines show the impact of massive new ships entering the market, especially on the Europe-Asia and transpacific Asia-to-US routes.

“The numbers previewed yesterday by the subscription news service, ci-online, show the worst hit route was Europe-Asia, where rates fell 8 per cent eastbound and 6 per cent westbound.

“Transpacific carriers saw prices fall 6 per cent from Asia to the US and I per cent on the return journey.

“Transatlantic trades were the best performing, being less affected by the new generation of ‘post-Panamax’ superships, which are too big for the market and the ports. However, rates still fell going west from Europe to the US, and rose 1 per cent the other way.

“Shipping shares have long seen sharp declines, following warnings from CP Ships of Canada, the Anglo-Dutch joint venture P&O Nedlloyd, Hong Kong-based Orient Overseas Container Line, Hyundai Merchant Marine of Korea, and Neptune Orient Lines in Singapore.

“Analysts are bracing for more bad news, expecting the gap between volumes and capacity to widen. Drewry, a London-based shipping consultant, forecasts the capacity of the largest container operators will rise 13 per cent this year, with a similar increase next year. This compares to an industry- consensus of world trade growth of 4-5 per cent.

“With shipping lines on slender margins with high fixed costs, the effect on profits is disproportionately steep.

“The consensus is that those companies with developed north-south trades to Australasia, South America and Africa should fare better because these routes are relatively undeveloped by the container industry.

“That should help protect companies such as P&O Nedlloyd, NOL and Maersk Sealand of Denmark. But it leaves those dependent on east-west routes more exposed, including OOCL, Hyundai, Hanjin Shipping, also of Korea, and Hapag-Lloyd of Germany.

“Falling bunker prices for fuel are helping, but with reports of rates still falling in the third quarter, the industry is ‘looking over a precipice’, says Raymond Maguire at UBS Warburg.

“The companies are trying to be upbeat, but analysts do not expect a recovery until the second quarter, at the earliest. Then the influx of new ships should slow, and the economic slowdown will have had time to reverse. ‘We expect a recovery to take effect then, but obviously that will depend on the length of the US economic slowdown,’ said an executive consultant at Drewry.

“In the meantime, observers are asking: why does the shipping industry always over-order?

“The highly fragmented and often privately-owned structure of the industry is part of the answer. Also, there is a ‘lemming mentality’ when rivals start buying new ships – always funded by willing bankers, says one industry watcher.

“This works well for first movers – as one Greek magnate proved when a ship he ordered for $ 42 million sold for $ 60 million before it was finished.

“Companies say they order when prices are cheap – as they were in the south east Asia following the 1997 recession – and that sees them through the cycle. But in such highly-geared businesses, return on assets fluctuates wildly – from 16-20 per cent at the top of the cycle, to heavy losses at the bottom, says Mr. Maguire.

“‘On average, most do not meet their cost of capital throughout the cycle,’ he says. ‘It really is boom or bust.'” –

So? This is the same stuff we’re reading about every day. Right? We’re quite aware of what’s going on currently in the shipping business, as well as the adverse effects today’s recession is having on international trade.

And the reason shippers are “over-ordering” is because they had no way of knowing about the “recession” – the one that began in 2007 (according to Mr. Bernanke).

But, as Mr. Bernanke knows – because he’s on record admitting it – the “recession” was already underway much, much earlier than in 2007.

And, contrary to their repeated alibis, ship owners were warned well in advance that things were going south in the container industry. It truly was a “lemming-mentality” that contributed to their ill-advised and costly purchase of unneeded superships, and in spite of knowing that the industry was “looking over a precipice,” a keeping-up-with-the-Joneses attitude continued to prevail.

By the way, the above article by Juliette Jowit isn’t really “the same stuff we’re reading every day”. Her report – about the sagging international trade, the “US economic slowdown”, and the expected “recovery” – was written back on August 21, 2001!

And yes. The “corporate fanning of feathers” has always taken precedence over everything else.