Economic Recession Bites Harder on Shipping Industry

The tide is rough for shipping lines; no thanks to the global economic recession, which has resulted in sharp reduction in cargo volumes worldwide. The last six months have seen a huge amount of capacity changes in the container industry, including the lay up of vessels. Many shipping lines have responded with job cuts, increase in freight rates that have sharply plummeted in last few months since the meltdown started.
Chief executive officer of Maersk Line, Eivind Kolding, said in an interview that more job losses would happen at Maersk Line.

According to Kolding, the company will make as big a loss in 2010 as in 2009, adding that cargo volumes could drop by 10 percent this year and show no sign of growth in 2010.
Said he, "We will have a substantial loss this year and next year will be equally difficult. We have been quite disappointed by the market development in April and May," he said.
Although he did not put a definite number of jobs to go, he, however, said that the imbalance between supply and demand will not even out until 2015, making further job cuts necessary.
The company has already laid off 24 percent of its employees in the last 18 months; Kolding said, "We have some further opportunity for rationalisation." He added that the company is close to its floor, the point at which it effectively starts paying customers to carry their goods.
Also as part of the economic recession fallout, the AP Moller-Maersk subsidiary had said it would charge $300 more per 20-foot equivalent unit (TEU) on its Far East to Mediterranean and Northern Europe lanes with effect from 1 July.

A peak surcharge of $150 per TEU would be added between August 1 and October 31. It also announced a hike in container freights from Northeast and Southeast Asia to New Zealand.
Neptune Orient Lines and CMA-CGM have announced similar increases. The hikes are a sure sign of struggling container lines' pent-up need to redress the huge hole in their finances that have been burnt by the world recession.

When contacted, managing director of CMA CGM Delmas Nigeria Limited, Peter Bleasdale, could not make any reactions because, he said he needed to catch a flight at the airport as the company was expecting some VIP's. But he promised to grant audience soon.
But Managing director of SDV Nigeria, a logistics company, Pierre Bellerose, said there has been a slight impact of the economic recession on its business, saying that there is a little slow down in cargo volumes in the country.
He noted that Africa was yet to be seriously affected by the economic recession like Europe and America.

The SDV boss, however, expressed optimism that business will improve around September, saying that cargo volume may reach the same volume like last year.
Industry insiders have viewed the recent increases as moves driven purely by market dynamics. However, other experts see this as a "make hay while the sun shines" tactic.
Several container-shipping analysts do not believe the rate hikes like the ones announced by Maersk Line can be sustained over the long-term

It is believed that shipping lines are not doing enough to counteract the global recession. Freight rates continue to rapidly decline and the industry remains in serious trouble.
London-based Drewry Shipping Consultants Ltd predicts that global container-market capacity will grow eight percent this year and 10 percent in 2010. The industry will lose a combined $ 20 billion before interest and tax, compared with a five billion profit in 2008.
Drewry's report analyses how carriers have reacted to the current global economic crisis by radically altering capacity via service suspensions, slow steaming and service deviations and lay ups.

While some of these strategies are certainly more effective than others, few if any shipping lines have yet adopted the full suite of measures consistently and there is still reluctance on a collective front to tackle the dire situation head on.
Drewry also argues that operators, who move the fastest and indeed, are more radical in their strategies, will be best placed for recovery in the long-term. But Drewry still expects some operators to fail this year.

 

Source: Hellenic Shipping News