Shipping industry braced for storm to blow long and hard
The global maritime industry is enduring hardships likely to affect it for ever.
The shipping industry is battening down the hatches for a global economic storm that could last years.
The slowdown in China, Europe’s anaemic recovery and the failure of other emerging markets to live up to growth expectations is having a devastating effect on the global maritime industry, which carries 65pc of the world’s trade.
One of the hardest-hit parts of the industry is container shipping, the movement of the ubiquitous steel boxes measured in 20ft equivalent units (TEUs) that transformed the industry in the 1950s by speeding up and simplifying international trade.
The strength of the headwinds faced was underlined recently when Maersk, the world’s biggest shipping line, reported a shocking set of financial results. Profits last quarter crashed 61pc to $264m (£174m) and revenue dropped 15pc to $6bn.
As a result of the poor performance, the Danish company announced plans to axe 4,000 of its 23,000 shore-based staff.
t’s not just container shipping that has been hit. The Baltic Dry index, a benchmark that tracks the cost of shipping bulk raw materials such as coal, steel and iron ore has tumbled to a near 30-year low.
Finally, because the oil price is so low, fuel costs are suddenly less of an issue for ship owners.
“Ship owners are holding on,” says Jeremy Penn, chief executive of the Baltic Exchange, the London-based maritime information business. “The issue of scrappage is not such a big one when the oil price is lower, as relative economy of modern ships is less pronounced.”
It wasn’t supposed to be like this. At the start of the year, there were high hopes that the fortunes of the shipping industry would be on the brink of turning around.
However, the recovery failed to take place and Drewry, the shipping consultancy, has halved its projections for this year’s container trade growth to 2.2pc.
Clarkson, another consultancy, has revised its forecast down to 3.7pc. Compounding the problem is a 7.1pc increase in container ship capacity Clarkson is expecting this year, taking it to the fleet’s capacity of 21.9m TEU.
The opening of the widened Panama Canal next year will only add to their troubles, as demand for ships previously too large to fit through the waterway now have new routes open to them.