Shipping like there’s no tomorrow?

1. “Losses Surge at China Shipping and Cosco. China’s biggest container carriers report increased first quarter losses as operating costs soar” – The Journal of Commerce Online (Apr 27, 2012).

“China Cosco Holdings, owner of Asia’s largest container shipping company by capacity, and China Shipping Container Lines each saw first quarter losses mount as box container rates remained below the profitability threshold and operating costs soared.

“Cosco, whose businesses also include dry bulk shipping and terminal operations, booked a loss of 2.7 billion yuan ($ 423 million) in the quarter, compared with a loss of 502 million yuan a year earlier, as sales fell 4.5 percent …

“China Shipping Container Lines, the country’s second largest carrier, posted a first quarter loss of 1.5 billion yuan ($ 229 million), compared with a net loss of 146.1 million yuan ($ 23 million) a year earlier.” –

2. “‘K’ Line Posts $ 503 Million Loss for Fiscal 2011” – Also from The Journal of Commerce Online (Apr 27, 2012).

“‘K’ Line swung to a loss of $ 503 million for the fiscal year ended March 31, a drop from its profit of $ 380 million a year earlier, as it posted a heavy loss in its container business.

“Like its sister Japanese carriers, MOL and NYK Line, ‘K’ Line had predicted a loss for the full fiscal year when it reported a $ 173 million operating loss for the last calendar quarter of 2011. …

“‘K’ Line attributed the loss to ‘weak market conditions, a strong yen and high fuel prices.’…

“The container market was ‘sluggish’ as a result of slumping cargo movements in the U.S. and Europe and an increase in the supply of containerships,the line said.” –

That’s the word from across the Pacific, now let’s hear what’s going on across the Atlantic.

3. From the SHIPPING NEWS Wednesday, April 27, 2012 – “More shipping funds insolvency expected as sector’s plight deepens”

“Thirteen of the world’s 19 biggest shipping banks have stopped lending to the industry because too many ships are chasing too little cargo value, cutting cash flows and leading to vessel seizures, reports Bloomberg.

“Investors who had been promised annual returns of 15 per cent have instead lost EUR37.5 million (US$ 49 million) when Germany’s Container Flotten-Fonds went bellyup last year.

“German tax exemptions for shipping funds, designed to provide cheaper financing than banks, are becoming meaningless, said Christian Nieswandt, head of domestic shipping clients at HSH Nordbank.

“‘The shipping fund is more or less dead for years to come,’ he told Bloomberg. ‘There will be further insolvencies.’

“Like the US housing crisis, ships were bought at the price peak in 2007. After values slumped, the size of the loan in relation to the value of the ship used as collateral for the funding from banks rose.

“The contract price for an 8,500-TEU ship dropped 31 percent to EUR92.5 million in 2011, from a peak of EUR134 million in 2007, according to Morgan Stanley. Values will decline to EUR89.5 million this year, said the bank.

“With even big players like Moeller-Maersk and Hapag-Lloyd showing losses last year as fuel costs rise, overcapacity persists and a price war threatening on the Asia-Europe route, many carriers cannot pay their debts, according to the VDR German shipowners’ association.

“Shipping funds financed purchases with borrowed money from banks, leaving them vulnerable when lenders raised interest rates, said Christian Luber, a Munich lawyer representing investors in failed German shipping funds.

“‘It’s like when you buy a house: the less equity you put in, the more interest you pay,’ said Mr. Luber, adding that the banks financed 70 per cent of newbuildings with investors providing the rest.

“Christian Murach, transport finance head at KfW IPEX-Bank, said some German shipping funds have been unable to service their debt ‘for years’ and their ships may have to be sold. This prompted the banks to write down the value of their portfolios, thus increasing expectations of further bank loan losses.” –

Back in 2008, the eloquent T.E. Raja Simhan – who knows something about the Asian economy – said, “If the U.S. sneezes, the Asian maritime industry catches cold.” What’s he saying now, we wonder.

The U.S. is well beyond the sneezing stage now – it has one foot on a banana peel, and it’s wearing blinders as well. And it’s not just the Asian maritime industry that’s nearly bed-ridden. All of Europe – and especially Germany, its financial backbone – is about to become a basket-case.

Analysts, consultants, CEOs – the lot of them – have come up with all kinds of reasons for the world’s downward spiral. For the last six years they’ve been assuring us that the “recession” is just about to turn the corner. It’s always like this, they say. The economy runs in cycles, you know.

Not a one of them has enough guts to acknowledge the fact that until Americans are back working, bringing home steady paychecks, and propping up the rest of the world by shopping like there’s no tomorrow – chances are good there won’t be a tomorrow.