Mothballed containerships pile up in Subic Bay

SUBIC Bay in the Philippines has become a haven for ships laid up as a result of the financial crisis, according to Bloomberg.

The port, 110 kilometres west of Manila, has never been so busy since the departure of the US Navy 16 years ago.

Last week, 19 vessels were moored in the bay awaiting charters. Another eight vessels are expected soon, said Ferdinand Hernandez, senior deputy administrator of the Subic Bay Metropolitan Authority, adding that if the downturn continues, we'll probably get even more.

Hundreds of vessels have been laid up worldwide as container lines try to boost rates depressed by US and European consumers who are cutting back on spending on Asian-made furniture, toys and other goods.

Neptune Orient Lines recently announced a rate hike for TEU from Asia to Europe by US$250 from April 1, Moeller-Maersk, Evergreen Marine Corp. and Orient Overseas (International) Ltd. have also announced similar increases.

Captain Perfecto Pascual, general manager of the seaport, explained that companies were using Subic Bay to lay up vessels because it was secured and offered protection from the elements. Nearly 22 ships were anchored there recently, compared with an average of about ten before the economic crisis began, Bloomberg reported.

Globally, 9.1 per cent of containerships, or 427 vessels, have been laid up according to the report. Thousands of containers are also going unused worldwide, leaving ports struggling to find space for them. Busan International Terminal in South Korea is holding at least 30,000 empty boxes.

The removal of so much capacity should see a restoration of rates, said Ken Cambie, chief financial officer of Orient Overseas (International) Ltd. Rate increases are needed on all trades, he added. But any increase this year is expected to be smaller than past ones as the global container fleet grows amid slowing demand, Bloomberg said.

Lower fuel costs are helping shipping lines, with prices having tumbled about two-thirds from record highs in July. Mr Cambie said Orient Overseas' fuel bill this year could be reduced by 49 per cent compared to 2008 if prices remained at current levels. But according to Bloomberg, a drop in fuel prices will not be enough to return the industry to profit.

Source: Schednet