NEARLY 15% OF THE WORLD’S CARGO SHIPS ANCHORED EMPTY OFF THE COAST OF SINGAPORE
Over 500 modern container and bulk ships are anchored off the coast of Singapore. This is the busiest time of the year for shipping and in fact for many years shippers pay a freight premium to ensure their goods are delivered in time for the busy Christmas season. Not so anymore. It appears the shipping lines know something politicians and economists don’t; that is the recession has only just begun and it will take years for trade to return to levels that would employ these idled vessels. These idled ships are anchored side by side as far as the eye can see and skeleton crews manning the vessels are there more for security against pirates than maintaining them ready for work at a moment’s notice.
Last week I mentioned 227 freighter aircraft, mainly wide bodies, are sealed up (protection from the hot sun and sandstorms) in the Mojave Desert awaiting their fate. Like the ships, is their latest port of call only temporary before they are scrapped for the metal and usable parts? Shipyards throughout Korea and China have no cargo ship orders on their books and when the last ships are delivered by the end of next year, Ulsan, South Korea’s shipbuilding hub, will soon resemble Glasgow Scotland and just like Glasgow, shipbuilding could well become an extinct industry. When the promoters of globalization figuratively forecast a “shrinking” world, after just a few years of experimentation, they had no idea it would literally take place!
Most major airlines have been teetering on insolvency for years. The first Gulf War nearly twenty years ago handed them their initial shock. Shipping Lines have been consolidating for the past thirty years with two maritime nations, the United States and Great Britain losing their fleets altogether. The world’s shipping lanes are dominated by five steamship lines. In less than a year, their balance sheets have gone from showing profits and good liquidity to where they now look exactly like their airline brethren. There is no question that if the current trends continue, Maersk will go the way of Citibank and become a Danish-owned government enterprise. The simple truth is transportation is hunkering down for different times ahead. China can bullshit us as much as they like, but those forty odd million workers they sent packing back to their families in far away places where rice has been tended to the same way for centuries are not returning to the industrial cities of the east. Those shuttered factories will scrapped, just like the 500 hundred ships moored between the Singapore and Malaysian coasts and the 227 plus planes rotting in the Mojave Desert of California.
The era of excess, particularly in the United States is over and the practically minded businessmen, such as transportation CEO’s are bracing themselves for changed times ahead and actually doing something about. They are also well aware as times do improve, nationalism, bolstered by a little protectionism, can only lead to less demand for shipping space. Capacity will continue to be reduced until matched by the supply of goods. For forwarders, we have one ray of sunshine on the horizon; as capacity shrinks rates will rise. The higher the rate, the better the margin and the more money we make!
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