Cyrene Reefs lies just opposite Singapore's world class port.'The shipping industry will need a highly powerful and synchronised turn in the world trade cycle to recover and that seems a bit of a long shot at the moment.'
Shipping lines slashing capacity in bid to ride out downturn
Robin Chan, Straits Times 6 Mar 09;
THE number of container ships sitting idle at ports around the world continues to grow ominously as shipping lines frantically slash capacity and push up freight rates to stay afloat amid the downturn.
There are now a record 453 ships with a cargo capacity for 1.35million standard 20-foot containers sitting empty - an increase of 15% cent in just two weeks, with more to come.
Thousands of containers are being left unused worldwide, taking up dock space. The Busan International Terminal, South Korea's busiest port, is holding more than 30,000 empty boxes, said Bloomberg.
HSBC senior Asian economist Robert Prior-Wandesforde told The Straits Times: 'This is the biggest world trade recession since the 1930s.
'The shipping industry will need a highly powerful and synchronised turn in the world trade cycle to recover and that seems a bit of a long shot at the moment.'
The idle capacity, outlined in a report on March 2, equates to about 10.7per cent of the world's container ship capacity.
But some experts tip that it could hit 25per cent by 2011 as a vast amount of new container capacity, perhaps as much as five million boxes, is due to come on stream - a result of overbuilding when times were good.
The crisis has also seen freight rates slashed to near zero due to the global slump in demand for products like toys and cars. This could lead to shipping lines losing more than US$68billion (S$105billion) in revenue this year if rates stay at rock-bottom.
But some desperate shipping lines are already raising rates in a bid to recover some of their costs.
Singapore Shipping Association president S.S. Teo said the 10per cent idle capacity was alarming but has been worsened by a low season in trade that is normally around the holiday months of December to February.
'Shippers are telling me that in December and January there was no trade to China. But in February, the letters of credit were coming in. So going into the latter part of March and April, we should see some improvement in the volume of trade,' he said.
Mr Prior-Wandesforde also pointed to a slight recovery in the Baltic Dry Index, a measure of rates for ships that transport commodities like steel and coal. The index has shown some signs of life and now hovers around the 2,000 mark after plummeting to nearly 600 in December.
He said this adds to anecdotal evidence that the Chinese economy is recovering, as activity in steel mills is picking up, housing projects are under way and bank lending has improved.
'There are bits and pieces out there to show that things in China are turning around,' he said. 'This should eventually be reflected in container shipping.'
The industry is a good indicator of the health of world trade, as about 90per cent of trade goes by sea.
The world's busiest ports have painted a less than rosy picture with the top three all reporting declines in container throughput.
In January, Singapore's ports handled 20per cent fewer containers than a year before. Shanghai and Hong Kong also reported 19per cent and 23per cent falls in their container traffic respectively.
Minister Mentor Lee Kuan Yew said on Wednesday that the continued decline in exports here had prompted him to believe that Singapore's gross domestic product could fall 10per cent this year.
chanckr@sph.com.sg
Worrying numbers
# There are a record 453 ships with a cargo capacity for 1.35 million standard 20-foot containers sitting empty.
# The idle capacity equates to about 10.7per cent of the world's container ship capacity.
