Staying Afloat

“Otherwise we are going to see ports … approach the point where cargo will not be able to go through them, ships will wait outside, schedules will no longer be maintained, and the new ships of 8,000-TEUs-plus will be just another white elephant in the industry.” – (Those were Tommy Stramer’s words which we quoted back in our February 2nd, 2005, Vol. II, Art. 14 commentary.)

And here’s what we’ve written since then:

November 23, 2009 (Vol. XXI, Art. 19) – “The supply ships – those giant container ship leviathans – are now no longer useful, and will never again be seen on the high seas.”

January 15, 2010 (Vol. XXII, Art. 8) – “Those giants are nothing more than overkill and are about to join hundreds of vessels now in mothballs. None will ever sail again. All will be scrapped.”

January 20, 2010 (Vol. XXII, Art. 10) – “And where there are no supplies, hundreds of container ships are put in mothballs … never to sail again.”

March 5, 2010 (Vol. XXII, Art. 29) – “As we said, those too big, too costly and too fast ‘lay-ups’ will never again see service.”

Now let’s hear what maritime analysts and consultants are revealing – finally:

– From The Financial Times (March 8, 2010):

“German shipowners now run global businesses … They control 35 per cent of the world’s container vessels, managing many of the ships that facilitated China’s export boom of the past decade …

“As a result, northern Germany faces the biggest storm ever to hit container shipping. The prosperity of ordinary citizens, several large banks and even federal states is in peril, alongside that of well-heeled shipowners …

“Most German owners, rather than finding customers and organising schedules themselves, charter vessels long-term to Maersk Line, Mediterranean Shipping Company and other container ship operators. However, the operators started to terminate expiring contracts when container volumes and prices collapsed in October 2008. Fees paid when charters are renewed are far lower than before, and hundreds of ships remain out of use.”

– From The Financial Times (March 9, 2010):

“Container volumes handled by Hamburger Hafen und Logistik, the terminal’s operator, fell 33 per cent last year. The downturn has now become so serious that HHLA – which is publicly listed but controlled by Hamburg’s state government – is considering taking capacity out of use …

“Hamburg’s move is the largest publicly under consideration, although Hong Kong’s Hutchison Ports, the biggest container terminal operator, has effectively taken its Amsterdam terminal out of use after it lost its only customer.

“The tactic has never been seen before in container shipping’s 53-year history, according to Neil Davidson, ports analyst at Drewry Shipping Consultants based in London. Until 2009, the industry had never seen a year-on-year fall in worldwide container volumes.”

– From The Financial Times (March 14, 2010)

“CMA CGM seeks outside investor”

“The world’s third-largest container shipping line is seeking capital from outside investors for the first time in an attempt to tackle a liquidity crisis that has dragged on for months and left it unable to complete payments for its ships …

“The fresh capital injection is part of a wider restructuring package which, if completed, would allow the company to access a $ 500m loan facility its lenders agreed in principle to make available in December. So far CMA CGM has been able to access only $ 80m of the facility …

“The failure to reach an accord is starting to affect CMA CGM’s fleet plans. At a conference last month in Hamburg, Mr Schapiro admitted George Economou, the Greek shipowner, had bought a container ship ordered by CMA CGM from a shipyard after the French company was unable to finance the purchase.”

– From The Journal of Commerce (March 16, 2010):

“Drewry Forecasts Carrier Liquidations”

“Although container freight rates are on the rebound on many routes, this does not mean the ocean container shipping industry will recover any time soon, and many carriers may run out of money before a recovery sets in, according to the latest edition of the Drewry Container Forecaster.

“‘Even if the industry can secure the same amount of fresh cash in 2010 as it received from shareholders in 2009, it will not be sufficient cash to cover its needs,’ said Neil Dekker, editor of the publication by Drewry Shipping Consultants in London. ‘Another estimated $ 1.4 billion of cash may be needed from other sources to keep the carriers in business. This may then be the catalyst that leads operators to start selling assets – such as terminals,’ he said.”

Not a very pretty picture. In spite of the devastation, maritime officials still echo Chicago Cub fans. “Wait ’til next year,” they keep saying. They need to be told that a “next year” is very unlikely. Their jobs and their industry will survive only if U.S. officials wake up to the fact that the world’s economy will collapse completely unless a way is found to provide jobs for unemployed Americans.

[We need an Executive Order, “a stroke of a pen”, and about 100 shipyards revitalized.]