Monday, January 26, 2009

Idle Containership Fleet Grows to 255 Vessels - 675,000 TEU

Idle Containership Fleet Grows to 255 Vessels - 675,000 TEU
(CIFFA e-Bulletin – January 22, 2009)

Shipping News - The level of idle containerships has risen to historic highs, with 675,000 TEU, or 5.5 per cent of the global fleet now idle, according to AXS-Alphaliner. This figure translates into around 255 container vessels by Alphaliner's last count to January 19, up from around 550,000 TEU two weeks earlier. Of these, 148 ships are from the charter ship market. And the worst appears yet to be over as Alphaliner forecasts this figure will reach 750,000 TEU in early February, with six per cent of the global fleet standing idle. It noted that the planned closures of CSAV's Asia-North Europe service, MOL and "K" Line's FE-WCSA loop 2 and MOL's ZAX service will add to the number of idle vessels, along with a few ships still sailing on services that were suspended in recent few weeks once they complete their port rotation.

Alphaliner estimates that if 100,000 TEU is scrapped this year, the global fleet would still grow by 14 per cent, up from 13.2 per cent last year. "However, this growth figure does not take into account the 750,000 TEU capacity expected to lay idle in early February. The market will have to absorb this non-working fleet, on top of new buildings. Adding this fleet overhang to the new buildings, the actual fleet growth - based on today's working fleet- will then reach 20," the Alphaliner report said, forecasting the situation is unlikely to improve until spring 2010 at the earliest. Adding to the container shipping industry's woes is the low price of oil, which is fluctuating between US$40 and $50 per barrel. However, if crude oil prices were to fall below $40 per barrel and bunker fuel to less than $200, it would make the practice of slow steaming no longer cost effective.

Commentary: This is a 19% increase in the number of idled container ships in only two weeks with a predicted increase to 26.66% of all container ships on earth by early February. If container ships represented US workers at roughly 25% unemployed after the crash of 1929 what can we expect for the global logistics and supply chain economy in 2009 and 2010? My concern is how many of the smaller contractors and supply chains can survive up to 24 months of zero business? How much of the recovery process will be only more severe due to fewer smaller competitive carriers when the rebound in trade occurs? Will shipping and transport be able to quickly meet demand or will freight rates suddenly sky-rocket again if most of the smaller carriers and contractors are downsized to such an extent or permanently out of business? Not to be gloomy but here is what happened to a lot of military cargo ships following the Korean War. Conversely all those empty containers could add up to very affordable housing for people who may actually not be able to afford anything else.

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