Global shipping tells the real story on the economy.

[kpetry]

When you want to cut through all of the BS out there about the economy, all the crap about "green shoots", and Benacke's comments that "the recession is almost certainly over", you look at transportation - the people who move the stuff that we buy (or don't buy). This is a fascinating article about what has been, and will be happening over the next couple of years to the shipping industry (the Ghost Fleet title ought to get your attention!). This will tell you the REAL state of the global economy. KP



http://www.dailymail.co.uk/home/mos...chored-just-east-Singapore.html#ixzz0R0J7jRUy

 

[popeye]

That story pretty well says it all.I bought some stock in a greek bulk shipper when it was down 90% from its high. I am still underwater. (No pun intended). Just about to bale on that one. You can see the same thing in the oil business- I live in East Texas, Lots of oil field/drillers in this area. All their storage lots are jammed with eq. For sale signs all over the place. Looks like at least a double dip or worse coming...

 

[JV II]

I wonder how many have been replaced or are scheduled to be replaced by post-Panamax ships.

http://en.wikipedia.org/wiki/Panamax#Post-Panamax_ships

 

[kpetry]

Looks like at least a double dip or worse coming...

This is what I'm worried about as well!

 

[popeye]

Current policy's at the federal level seem to be pushing the economy towards another disaster, worst than the last one. This insane energy policy (environmentalist) is going to lower the standard of living for all of us.

 

[Henry Boyd]

KP,

your premise is correct, people are looking at the movement of containerized cargo because of the implications to the world economy. Interesting article, however while a number of the quotes are indeed factual, they are strung together in a manner that takes them somewhat out of context. Usally this is what happens when a reporter trys to report on an industry they don't understand. The quote by 'local fisherman Ah Wat' should give a good feeling for the depth of research conducted. Also having spent a fair amount of time in the UK, my recollection of the Daily Mail was that it seemed only a small ste above our National Enquirer.

First off the Singapore anchorage is no secret, and has been there for more than two years. Why it hasn't been publicized is because the ships are not in cold storage, i.e. engines shutdown, systems shut off, etc. Most of those ships could return to service tomorrow with the arrival of a full crew. And that is why they are not publicized, they can be stolen very easily. Since the replacement cost for those two APL vessels in the photo is about USD $200 million, how much do you think their owner, Neptune Orient Line of Singapore, would be willing to pay in ransom? You should also be aware that Singapore is the unofficial capital of the ship owning world, so these are parked in their owner's back yard so to speak.

The fact is, recession or not, many of those ships would have been laid up somewhere between 2009 and 2011. The reason is that in 2003/4 the liner companies began ordering 8,000 TEU plus sized container vessels. A TEU is a measurement container cargo carrying capacity. The significant point is that the largest vessels prior to this were rated at 4500 TEU. Additionally, the older vessel designs had a maximum capcaity of 4500 TEU, the new vessels are designed to be stretched to 13,000. Now they are being built at 9,000 with capability of going to 17,000 TEU. The reason for the bubble is that until 2013/4 there will not be enough ships that will be old enough to be retired.

Exacerbating things is the run up in commodities from 2003 through 2008. Older ships that should have been retired were kept in service not only to carry the commodities, but also because the value of the vessels, and associated charter rates were based on the Baltic Dry Index (BDI). The BDI is a commodity metric that went through the roof between 2003 and 2008. So at this time the vessel population is not the thing to be looking at for an indication of the overall economy

What people should be looking at (and many in the know are) is not the size of the containership fleet, but the number of containers in service. In 2007 my firm projected the world container fleet to be 28,000,000 TEU by the end of 2008 based on a computer model using data we have been collecting since the early 80s. Besides container production and retirement we have also been tracking the size of the world containership fleet in terms of container capacity. As is no surprise production dropped off during the third and fourth quarter of 2008 leaving the population at just under 26,000,000 TEU. At the same time stocks of inventory containers began growing in Asia as out bound bookings dropped off. By the end of the first quarter 2009 there were approximately 4 to 5 million TEU in inventory, mostly in Asia.

Starting at the end of June, idle containers began leaving inventory and returning to service. As of last week a survey of fleet operators we conducted showed that the idle inventory was down to between 2 and 3 million TEU. Recent publications by the two major container manufacturers both stated that while their container production for CY 2009 would probably be less than 300,000 TEU (5.0 % of 2008), their container depot and terminal handling activities were showing marked increase in the repair and out bound handling of inventory containers for their clients.

Present trade stats for US ports have yet to show an uptick in in bound container landings. But this is largely because the newest data thay publish is for July. When we look at the combined in bound handling for the ports of Long Beach and LA (the US' top two ports) we only see slight increases from the month of June. But with a three to four week transit time from Asia to the US, the July port numbers are a reflection of what was happening in June in Asia, before equipment began moving.

Port statistics from China, are on a good day less than reliable, but that being said they are showing increased activity.

So while I don't know if the recession has ended, I can tell that there are some very reassuring trends taking place. I will also add that in my thirty plus years experience in the container shipping industry, reductions in container depot inventory have always been on the leading edge of an improvement in the business cycle.

Henry

 

[popeye]

Maybe I will keep my EXM stock another week or two...

 

[Henry Boyd]

I wonder how many hae been replaced or are scheduled to be replaced by post-Panamax ships.

http://en.wikipedia.org/wiki/Panamax#Post-Panamax_ships

I think Panama's decision to enlarge the canal was indeed a catalyst in the decision to build bigger ships. There were also other compelling forces at work. The largest being a recognition that China was going to be the world's source of consumer goods for the future. Very Large ships making fewer intercontinental trips per year result in a significant reduction in cost (mostly fuel) per container load delivered.

I think the decision to enlarge the canal acted more as a trigger to turn pie in the sky planning committee musings into actual ship designs and business plans.

Henry

 

[kpetry]

Henry - Wow! Thanks for the excellent insight! It pays to have friends in the know! Here I thought I had some inside info! Glad to hear things MAY be better than they seem at this point, at least from this perspective.

 

[Four Suns]

I think what Henry is saying is "Short Google"

 

[Presentation]

Henry,

Thank you!

I’m sure that took a lot of time to type.

I was able to follow that and I appreciate your information and am glad you shared your knowledge.

 

[Alegria]

Henry what a great post. Your points are well taken. I especially like the reporters prime source the fisherman in the village who does know where the ships go.. Thanks for sharing!

It's like I always say! "Figures lie and liars figure" That is how I view most of the economic news these days. Until there are jobs and income for the unemployed they don't need to ship that much to the West for Christmas!!!

 

[Presentation]

Hey Henry,

It’s been 4 months. Can you please give us an update on idle container volume?

Thank you.

 

[dpmulvey]

Interesting write up Henry. I wonder who is going to buy the "stuff" in the containers destined for the US. I have always been of the ilk to double the published unemployment rates to arrive at the real picture. That said, real unemployment is 20%. I don't need a new TV if I have to worry about food.

My $0.02.

 

[Henry Boyd]

Interesting write up Henry. I wonder who is going to buy the "stuff" in the containers destined for the US. I have always been of the ilk to double the published unemployment rates to arrive at the real picture. That said, real unemployment is 20%. I don't need a new TV if I have to worry about food.

My $0.02.

David,

That is a good point. But here is the thing. When I started 32 years ago container shipping was about moving high value cargoes that for the most part were purchased with discretionary income, aka luxury goods.

Now, much of our daily lives is imported; fruits and vegs from Central America, Europe, Asia and Israel. Clothing from SE Asia. Yes there is a lot of luxury/discretionary income stuff coming from China, but so are nails, screws, car parts (retail and OEM), tools, pencils, paper, office supplies, tape, glue, etc. and the list goes on. I might also add 99.9% of the stuff sold by Walmart and Target.

The big flaw in the outsourcing business model is that if you move all the jobs away, pretty soon your customers won't have money to buy your products.

Henry

 

[Henry Boyd]

Hey Henry,

It’s been 4 months. Can you please give us an update on idle container volume?

Thank you.

Doug,

I trying to figure out how I can get a report uploaded so it can be seen. Does anyone know if there is a service like Photobucket for PDF documents?

Henry

 

[dpmulvey]

Doug,

I trying to figure out how I can get a report uploaded so it can be seen. Does anyone know if there is a service like Photobucket for PDF documents?

Henry

You could link it or upload it to the space your ISP provides (if any).

 

[dpmulvey]

David,
.....The big flaw in the outsourcing business model is that if you move all the jobs away, pretty soon your customers won't have money to buy your products.

Henry

Add (lack of) quality control to the aftermath. A fellow on another site was having a yacht built in China. Two years and a big lawsuit later he got his deposit back.

My post holiday fat arse is in a 38x34 trouser. I bought 2 pair of the same pant labeled 38X34 (one black, one brown) to get me through the diet. I bought the same pant in a 36x34 last year. The new black pants were too tight in the waist and too long. The brown ones were too loose in the waist and too short.

Just Damn!

 

[Henry Boyd]

I ended up creating a temporary document download page on my company website. Here is a link to an article that I wrote for a client at the end of the year highlighting what had happened in 2009 with respect to the container and containership fleet.

http://www.lhbco.com/page7/page7.html

Since this was written in early December, empty container inventory has held steady, a good sign in that historically the post Christmas Rush period has resulted in increases of inventory. Vessel layups continue to persist at the same level as Q4 09, however, the demographics of the laid up fleet has been changing. Newer previously laid up vessels have been chartered out replacing older previously working vessels.

There are also signs that domestic traffic is up in China, the Yangtse River Administration is reporting bulk traffic at the ports along the Yangtse are up 11% for 2009, and container throughput for 2009 was off 6.8% which is lower than the current average for Chinese ports. In general outbound loadings from Chinese ports have been on the rise. However, there is also a scheduled rate increase on transpacific cargos begining in Q2 10. Its not clear if this is a sign of improvement, or shippers trying to stuff the supply chain before the rate increases take effect.

On another note, Norfolk Southern has recently made commitments to acquire large numbers of US domestic containers, suggesting antiiciaption of improving domestic freight.

Henry

 

[Presentation]

Thank you!