Shipping Costs to Remain Low for Next Few Years

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Global Trade, Logistics

In what may not be good news for shipping companies we can find some encouraging rumors for those consumers of metals that are keen to see lower costs. 2007 was a record year for new ship orders and though 2008 was down on 2007 it was still up on 2001-2005. With freight rates dramatically reduced from their highs of 2008, it is no surprise to find that shipping line utilization rates are also down and ship owners are canceling new vessel orders. Even so there will be an increase of 9% in the bulk carrying capacity of the world’s fleets in 2009 as already started vessels enter into service according to the Bank of Greece. Greek ship owners control about 15% of the world’s vessel by number, making them the world leaders. The Greek order book stands at 55% of the existing fleet and 16% of the global order book in spite of OECD predictions that global trade will shrink by 13.2% this year.

The shipbuilding industry is caught between shrinking trade volumes, falling rates and ship owners struggling to raise finance for vessels on order resulting in record order cancellations. Meanwhile at the Sea Asia 2009 conference, delegates made some interesting observations concerning China and ship construction. It is not in China’s interests to have high freight rates, and industry insiders believe China will maintain an oversupply of vessels to keep world shipping rates low. As many of these new ships are being built in Chinese shipyards, it is believed the government will complete the ships even if the orders are canceled. The expectation is an expensive and painful shipping bubble will now burst. For shipping the worst of the crisis is still to come.

Container traffic is also down across European, North American and Asian ports but in a graphic illustration of how mainland Europe’s state owned port authorities differ in approach to the UK’s private ownership structure, expansion plans developed over the last few years at Rotterdam, Hamburg, Bremerhaven and Le Havre are all going ahead adding more container handling capacity, while the UK’s terminals in SE England owned by Dubai Ports and HPH are postponing plans until the medium term prospects become clearer according to Cargo News.

On balance the increase in vessels and in handling facilities should keep shipping lines competitive and handling costs down for the next few years, helping to control one of the more significant variables in metals costs sourced overseas.

–Stuart Burns

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