With economies around the world struggling to recover, it comes as no surprise that ocean shipping is going through travails of its own. But the severity of the problem across the industry is unlike anything observers have seen before.
IHS Global Insight and Lloyd's Register-Fairplay Research, research firms that closely follow ocean shipping trends, say there is an unprecedented imbalance in the supply of ocean shipping capacity and demand for that service. And given the long lead times for bringing new ships on line, the gap may widen even if ship owners cancel orders and scrap or idle more vessels.
That could prove good news for shippers, as capacity will be plentiful and rates low when demand begins to pick up. But it is proving painful for ship operators.
Evidence of the slumping demand for ocean service can be found in the National Retail Federation's monthly Port Tracker report, which includes statistics on retail import volumes at major U.S. ports. According to the report issued in May, imports rose in March from February's seven-year low, but volume was still down 15 percent from the March 2008 level. Year-over-year volumes have declined for 21 straight months, and the report forecast that double-digit declines would continue through September.
The U.S. trends reflect what is happening worldwide. IHS Global Insight and Lloyd's Register-Fairplay, both subsidiaries of international research firm IHS, reported in a webcast last month that world container volume will be down 5.8 percent this year. Although they expect demand to pick up toward the end of the year, the researchers say growth in container capacity will easily outstrip growth in demand for at least the next several years.
Faced with a capacity glut, ocean carriers have been canceling orders for new vessels. Christopher Pålsson, manager and senior consultant for Lloyd's Register- Fairplay, estimates that those cancellations will average 330 ships a month this year. He also expects ship owners to take many vessels out of service to reduce capacity. Even so, Niklas Bengtsson, a project manager and senior consultant for Lloyd's Register-Fairplay, predicts worldwide container fleet capacity will grow by 8.9 percent a year until 2013, while demand will grow by about 4 percent a year during that time.
If there was good news in the report, it's this: The research firms see the recession, while unusual in its depth, as part of a normal business cycle. They expect world trade to grow over the longer term, albeit at slower rates than in recent years.
