The Business Times brought us this from Singapore in its June 25th issue:
“Shipping sector more confident, says SSA chief”
(SINGAPORE) The shipping industry is more confident about the second half of this year, as the downturn looks like it has bottomed out, newly re-elected Singapore Shipping Association (SSA) president SS Teo said yesterday.
“‘There is more confidence among the carriers that the rate restoration now being implemented will be successful,’ he said on the sidelines of SSA’s annual general meeting.”
Not too far off the tip of the Malay Peninsular is Singapore Island. It’s so close to the mainland that only the Johor Strait keeps this independent city-state from being part of Malaysia.
As opposed to the simulated optimism of SSA president Teo, the neighboring maritime authorities across the Strait countered with this evaluation:
“Box Throughput Will Drop 20% – Shipping Association of Malaysia”
“The Shipping Association of Malaysia (SAM) has said that it expects box volumes in the country’s ports to be down 20% this year due to the drop in demand and global overcapacity. SAM chairman Ooi Lean Hin said that this was in line with global trends and that the coming year would see a struggle for some countries going under. With many container newbuildings due for delivery this year only adding to problems of over-tonnage, Ooi said that while cancellations of most of these orders would be difficult, it might be possible to delay deliveries.”
So, according to SS Teo, “… the downturn looks like it has bottomed out …” “There is more confidence among the carriers …” he’d have us believe. Most folks will swallow that line because they’re too lazy to question the word of anyone in authority. No, they’re not too lazy, they’re too dumbed down – too ignorant. Such ignorance, you may recall, is what George Orwell wrote about in his literary classic, “1984”. “Ignorance is strength” was one of Big Brother’s slogans. Fitting.
Those who took the time to examine the conflicting statements issued by the opposite numbers in those neighboring Southeast Asia maritime groups would have run into what Maersk Line’s CEO was telling Bloomberg News.
The Journal of Commerce told of that interview on June 25th:
“Maersk Chief Projects 10 Percent Box Dropoff”
“Global market unlikely to show growth until 2010”
“Maersk Line CEO Eivind Kolding thinks global container volumes may drop more than 10 percent and show no growth until next year.” [Are you taking notes, Mr. Teo?]
“‘We will have a substantial loss this year and next year will be equally difficult,’ he told Bloomberg News in an interview in the company’s Copenhagen headquarters on Monday. ‘We have been quite disappointed by the market development in April and May,’ he said.
“Kolding said the oversupply of containership capacity won’t level out until 2015, and the line will need to make further job cuts following its 24 percent reduction over the past 18 months …
“‘Getting lower down from this point will actually mean you have to pay the customer to take his business. There is a floor and we are quite close to that now,’ Kolding said …
“Maersk Line, which operates 470 vessels and owns 1.9 million containers, lost $ 559 million in the first quarter of this year as its rates dropped 24 percent from a year earlier and volumes fell 14 percent …
“Maersk Line, which transports about 20 percent of China’s container goods, has reduced its head count by 24 percent to 17,500 employees from 23,000 at the beginning of 2008 and will cut more jobs, Kolding said, declining to give a specific number.
“‘We have some further opportunity for rationalization,’ he said.”
We have a pretty good idea of what that “further opportunity” might be, but this bit of advice from India spells it out a lot clearer than we could:
“How to come out of the crisis” is the way the advisory began.
“What remedial measures could be taken to get out of the crisis? Analysts and consultants have come out with four specific measures to bring the shipping market to some order and discipline.
“One is to scrap all the ships which are more than 20 years old so that some excess capacity from the world fleet can be taken out. But the new orders that are being delivered in 2009 and 2010 are reported to be of such magnitude that the consequential effect could be marginal.
“The second measure advocated is to lay up vessels in the age group 15 to 20 years so that more fuel-efficient ships could be employed to gain economic advantage. But the level of overcapacity in all sectors of the global fleet would suggest that these measures would not be capable of producing the desired results.
“The third and fourth measures suggested by Drewry Shipping Consultants are the most radical and painful. It has suggested cancelling all new containership orders even by foregoing the initial down payment made to the shipyards. The still more painful measure suggested by Drewry is to lay up all the ultra large containerships of 10,000-TEU and above.
“Laying up such brand new very large containerships from the shipyard to the backyard as slumbering elephants is indeed the most painful decision shipowners seem to be reluctant to take. A very recent report suggests that 735 ships of 41 million DWT have already congregated in Singapore port. [Tommy Stramer R.I.P. foresaw those elephants. Remember?]
“But there is certainly merit in Drewry Shipping Consultant’s suggestion to lay up these Goliaths. A significant number of very large and ultra large containerships are in service and if they are laid up it would make a huge impact. Moreover, the regions that are likely to show early signs of economic recovery will be the emerging economies of India, China, South-East Asia, Latin America and the Middle East where containerships in the range of 3,000-8,000 TEU would be more ideal as their ports would not be able to accommodate such ultra large carriers.
“The very idea of introducing the extra large carriers into the container shipping fleet was to exploit fully the economies of scale. When cargo volumes have shrunk and the global economy is weakened, there is no possibility of filling up such large slots and, therefore, such ships would not be able to take advantage of the economies of scale in the current environment.
“For ordinary ailments, physicians do not prescribe high potency drugs. Only when life is threatened are high potency drugs administered to save the lives of patients. Shipowners of very large and ultra large ships do not seem to have many options left but to swallow such bitter pills to save shipping from a calamitous fall.”
A very interesting presentation, in spite of the fact that the writer speculates on an impossible economic recovery. But so does everyone else. To assume that the economic free fall cannot be ended, and that a worldwide calamity of unimaginable proportions is inevitable, is – well, unimaginable. But it’s time some serious thought was given to that unthinkable event.
No one has answered the question we asked a number of months ago – and we’ve asked it many times since. “How” will this economic downturn be brought to an end? What means will be used to bring the economies of the world out of this depression? “Bailouts”? “Stimulus” payments? They’ve never worked and they never will. On rare occasions, analysts mention the unemployment problem, but it never occurs to them that a decades-long slide into widespread joblessness is the root cause of our economic woes. “The bursting of the housing bubble” … “the credit collapse” … “the failure of our banking and financial systems” … are the reasons analysts give us. All consider these events to be causes when, in fact, these are the effects of an unemployed citizenry that has lost its buying power.
Well, we keep hearing that the government with its trillions and trillions will soon set up manufacturing facilities and bring joblessness to an end. And what do you suppose those manufacturing facilities will turn out? And what do you suppose the reaction in Asia will be? With their low wage scales they’ll flood our markets with comparable goods at half the price. And isn’t that how we got to where we are now?
But go back and read about our patented container ship and the emergency shipbuilding programs of the 30s and 40s. Think about it. It’s the only way to avoid the unthinkable.