More than a tenth of the vessels that transport the world"s manufactured goods in containers is idle.
From Loch Striven in Scotland to the Strait of Malacca in Southeast Asia, more than a tenth of the vessels that transport the world"s manufactured goods in containers is idle. For most, orders to sail will not come for some time. Although world trade, which collapsed last year, is beginning to recover, driven especially by demand from developing countries, that recovery is being offset by added capacity in the large number of new container ships that will keep steaming out of the world"s shipyards.
Among those suffering most are lines like the German company Hapag-Lloyd and the Danish group A.P. Moller-Maersk, which ship boxed goods around the world. Much like the giant banks crippled by the subprime mortgage crisis, those companies are paying now for having expanded too aggressively during the boom, according to analysts.
Drewry Shipping Consultants in London estimates that the 20 or so major carriers, all Asian or European, lost $20 billion in 2009. According to Alphaliner, an industry information provider, seven smaller carriers went out of business last year, including Contenemar of Spain.
?We"ve never seen anything like this,? said Chris Bourne, executive director of the European Liner Affairs Association, or E.L.A.A. ?It"s the worst situation since the start of containerization in the "60s.?
The depression in revenue is weighing not only on the shipping companies, but also on ports and shipyards, especially in Europe, which have seen prices slump amid the glut.
Financing is not yet arranged for most ships on order this year and next, analysts say.
There have been deferrals, almost certainly involving lost down payments, which are typically 15 percent to 20 percent ? not insignificant if the bill is $160 million. The privately held CMA CGM of France, one of the largest carriers, recently said that it was discussing cancellations and postponements with South Korea.
Carriers have long had to adapt to economic cycles, shifting trade patterns and geopolitics. During the 1970s, they were hit by the oil shocks and the reopening of the Suez Canal, which cut demand for the supertankers that round southern Africa. Recovery took a decade, hampered by recession during the 1980s.
According to IHS Global Insight, a research and consulting firm, the global liner industry ? the companies that mainly transport cargo containers ? is responsible for 13.5 million jobs directly or indirectly. The 400 liner services carry 60 percent of international seaborne trade, according to the World Shipping Council, which represents the industry; the remainder is carried mainly by tankers and bulkers. The most important route in volume and value is from Asia to Europe.
China, which recently surpassed Germany as the world"s largest exporter, announced last Sunday that exports had risen 17.7 percent in December from a year earlier, the first increase in 14 months; imports soared 55.9 percent in December.
Other developing countries are also seeing strong demand for freight, particularly products like cement or steel for building projects. That translates into business for tankers and bulk carriers, however, rather than container vessels.
Container traffic will probably not recover prerecession levels until 2012 or later, most analysts say. Drewry Shipping expects a 2.4 percent increase in global trade volume this year, after an estimated 10.3 percent plunge last year.
?On the demand side, we do see some strength; we see continued strength in China,? said Vikrant S. Bhatia, chief executive of KC Maritime, a bulk-carrier shipping line based in Hong Kong. ?The problem we see is really on the supply side.?
Until 2008, the liners were cresting; shipyards were humming, building ever larger ships as ports expanded and new services opened, underpinned by low-cost finance.
?Everyone thought they could walk on water,? said Jesper Kjaerdegaard, a partner with the consulting firm Mercator International in London. ?The container liners were like kids in a toy store.?
The expansion meant that even if trade had grown as before, there would have been capacity issues, he said. Container vessel deliveries grew to 14 million standard containers at the end of 2009, from 4 million a decade earlier, according to Alphaliner. The market soared especially from 2005 to 2008.
Deliveries will fall to 127 in 2012 from 371 this year, according to Alphaliner. Still, the container fleet will grow 14 percent this year and almost 10 percent next year, showing that it will take years to balance supply and demand.
In terms of ships built, South Korea is the global leader, but China and Japan have efficient industries, and India and Vietnam are entering the market.
Hercules E. Haralambides, director of the Center for Maritime Economics at Erasmus University Rotterdam, said many Asian carriers were in a better position than others because government subsidies there allowed yards to offload canceled orders to domestic liners or owners at low rates.
The European industry has been in decline for years. Italian and German shipyards have recently sought state guarantees, and the European Commission approved aid to the historic Gdansk yard in Poland last year.
But government support runs beyond shipbuilding. Tens of billions of euros were extended to the sector in Europe last year, excluding aid to banks most exposed to the sector, like Royal Bank of Scotland and Commerzbank. Berlin and Hamburg have already stepped in to support HSH Nordbank, the largest shipping finance bank, and the German government has offered Hapag-Lloyd ?1.2 billion, or $1.7 billion, in guarantees.
CMA CGM has also opened talks with Paris, and French ship owners have requested guarantees to meet lenders" demands. French and German executives have requested ?bad banks? in which to unload problem debts.
Fabio Pirotta, a spokesman for the European Commission, which polices competition policy in Europe, said approval of such aid for shipping companies was ?still under assessment.?
But stronger industry players and shippers are already crying foul. Anders Würtzen, head of public affairs at A.P. Moller-Maersk, said state aid to liners was ?always bad news, whether granted to European or Asian companies, to the extent that it is used to maintain vessel new-building programs that could otherwise be reduced or delayed.?
That sentiment is echoed by shippers, the customers who own the goods that are shipped.
Maersk, owner of the largest carrier, Maersk Line, posted a first-half loss in 2009 of $540 million. Morten H. Engelstoft, senior vice president, said the company had been shedding capacity, using ?super-slow steaming,? laying up vessels and examining alliances to share routes, as long as they did not violate antitrust rules.
The outlook is still ?bumpy,? he said. ?Despite the latest rate increases, the rates are below cost and clearly unsustainable.?
An E.L.A.A. index of European import rates fell below 50 in March, from 100 in 2008, before recovering to 80 in the autumn.
Further out, consolidation is unlikely until the market stabilizes further, and that will take time, said Mr. Bourne of the E.L.A.A.
The near-term fix still involves mooring vessels offshore. At Loch Striven, Maersk has six ships idle; it expects them to remain there another year.
The company has been trying to win over skeptical residents by arranging tours and reducing noise. Local anger is now directed at the port of Clydeport, for sending the vessels to the loch after Maersk had requested facilities.