More troubled waters ahead for shipping

Maritime Journal -

It’s more doom and gloom from the forecasters when it comes to the state of the shipping industry as we near the end of 2011 - but there may just be a glimmer of hope too.

Last week, an article in the Financial Times warned that the looming year end is providing a deadline for shipowners and auditors to decide whether a company is viable or not as they continue to navigate troubled waters.

Simon Bennett from the International Chamber of Shipping (ICS), said to Maritime Journal: "The effects of the economic downturn have been severely exacerbated by the huge quantities of new ships that have recently been delivered, many ordered when shipping markets were at their peak before 2008.

In short, there are too few cargoes chasing too many ships. Freight rates have plummeted, and many shipping companies are now struggling to meet the interest payments on their capital costs and are operating their ships at a loss."

The eurozone crisis is a continuing worry for the market. This, coupled with fears across the industry about the negative impact of overtonnage fuelled by huge ship orders from China, is exacerbating the struggle.

Shipping markets are notoriously volatile and ICS say that at some point in the future, hopefully sooner rather than later, the supply/demand balance will eventually be restored and freight rates will eventually return to sustainable levels. But this will be at the price of a major restructuring over the next few years.

Mr Bennett added: “We can expect takeovers of weaker companies leading to greater market concentration, a further shift in ownership towards cash-rich emerging nations, and probably far greater involvement from governments than hitherto, whether in the form of investment by sovereign wealth funds, or the provision by governments of loan guarantees.”

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