May 17, 2020

How Global Shipping Has Overcome the Recession

Freddie Pierce
3 min
Global shipping has overcome the recession

Few industries were hit as hard by the global recession as the shipping sector, which lost an estimated $15-20 billion in 2009.

As Peter Sand, shippin...

Few industries were hit as hard by the global recession as the shipping sector, which lost an estimated $15-20 billion in 2009.

As Peter Sand, shipping analyst at The Baltic and International Maritime Council, explains: “Demand for ships to transport dry and wet bulk commodities completely collapsed. Evaporation of demand and difficulties getting letters-of-credit were important factors. For container ships, demand contracted by 10 percent year-on-year in 2009.”

The impact saw shipping lines falling into debt and some closing their doors. When Japanese shipping line NYK Line saw its net income fall from JPY56.1 billion in 2008 to a loss of JPY17.4 billion in 2009, it had to react.

Takeshi Morinaga, a spokesperson for NYK Line, said that the company focused on other regions and industries. “We are deepening the scope of global logistics business; strengthening our sea and land car transportation business in China and India; and expanding our natural resources and energy resources transportation business.”

Quick response

As volumes recovered, companies also increased their rates in the third quarter of 2009. Container line CMA CGM Group said: “Lines implemented measures such as newbuilding cancellations and delays, scrapping of older tonnage, return of chartered vessels to their owners, implementation of slow and extra-slow steaming, generating substantial fuel savings which have rebalanced supply and demand on the market.”

Others believe the reaction of global ruling powers helped the industry cope. “The world’s governments have acted sensibly. We haven’t seen heavy subsidising or protectionist measures to save national carriers and thereby prolonging the crisis and over tonnage in the marketplace,” Jan Fritz Hansen, executive vice-president of the Danish Shipowners´ Association, said.

By the end of 2009 things had started to improve. One of the world’s busiest ports, Hong Kong, saw monthly container throughput record year-on-year increases from December, while growth of 16 percent was recorded in the first half of 2010.

China emerged from the downturn as one of the world’s biggest economic powers. According to 2009 economic data, it replaced Germany as the world’s leading exporter, with 10.7 percent growth in the fourth quarter of 2009, while the Beijing government’s strong economic policy led to surging imports.

It is believed that Asian trade helped many lines survive the recession. “The intra-Asia trade remained stronger than the main East-West trades and that may have helped those carriers in that trade,” Anne Marie Kappel, vice-president of World Shipping Council, said. “Liner shipping is heavily reliant on consumer spending because most of what is carried on ships is finished consumer goods and the parts and materials used to manufacture those goods.”

Container shortage

The recovery has been hindered by a shortage in containers that hit in the second quarter of 2010, when a surge of volumes from Asia took lines by surprise. Problems occurred when the mostly Chinese container manufacturing factories closed because of the downturn, and many workers were hired for other work under the China Stimulus Plan. The global container fleet shrank by 4 percent in 2009, according to leasing firm Textainer Group.

The shortage was compounded by lines operating vessels more slowly to cut fuel costs, resulting in equipment spending more time at sea. As a result, China Cosco and China Shipping Container Lines imposed extra surcharges, while Maersk reactivated idled vessels to help relocate empty containers and ordered new boxes.

“In the meantime, carriers are asking their export customers to provide as much advance notice as possible for their requirements,” Kappel said.

Overall it appears that the first half of 2010 was positive for the shipping industry – volumes are rising, the container shortage is easing and carriers have been able to increase rates. Experts believe that the growth for 2010 will be respectable. However, caution remains about where new demand will come from.

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