Shipping firms see calmer waters, but recovery still beyond horizon
- Source: Global Times
- [02:48 October 21 2009]
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Early signs suggest that the global shipping downturn has bottomed out as freight rates recover to near break-even levels, but it could be years before the industry returns to pre-recession levels.
Hong Kong-based container ship operator Orient Overseas (International) showed just how dire the industry's position remains when it said on Tuesday its shipping revenue for the third quarter sank 42 percent.
Demand and prices in container shipping collapsed last year with prices on some routes dropping to zero as shipping companies asked exporters to pay only for fuel and terminal charges.
But share prices have rebounded sharply in 2009 on hopes that improving global trade and demand could help these companies to float again.
Maersk Line, the world's biggest container shipper, expected container shipping freight rates to reach break-even levels by the first quarter of 2010.
The Baltic Exchange's main sea freight index, .BADI, which tracks the rates of shipping commodities such as iron ore, coal and grain, hit a two-month high Monday at 2,766 points compared with its May 2008 peak of 11,793.
But shipping firms have warned that there's no quick fix for the industry.
The imbalance between supply and demand will persist for several years, weighing on earnings. And many companies are burning through cash quickly, which will make it difficult to pay off ships they ordered in better times.
Meanwhile, the industry is struggling through. CMA CGM, the world's No. 3 container carrier by capacity, said it was in talks to restructure its multibillion-dollar debt.
The industry needs to consolidate to become more efficient, say analysts.
It is unclear when that will happen – shipping firms lack money for M&A and some operators could even go bust.
"Who wants to buy ships? There is no price and market for container ships," said Stanley Shen, a spokesman of Orient Overseas Container Line.
Reuters
