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During boom times, shipping was expanding so
fast that a slump seemed impossible. But the
impossible happened and now the shipping
industry, along with related exchange traded
fund (ETF), are searching for a firm direction.
During the first six months of the year, the
shipping industry shrank by almost 16%, the
first accounted stunt in growth for the
industry, report Alexander Jung, Thomas Schulz
and Wieland Wagner for Spiegel Online.
The
number of containers being shipped by America is
down 19.2%, Europe is down 17.8% and Asia is
down 14.8%, reports Speigel Online. Among other
worrisome statistics:
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The
giant ships are sailing half-empty or left
docked in harbors.
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Billions are still being spent on ports with
diminished traffic.
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Bankruptcy looms over leading shipping line
operators, shipping banks and
charter shipping companies.
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New
orders for ships currently represent 50% more
than the worldwide
container capacity; this excess capacity could
depress shipping prices.
In an attempt to reduce loading capacity,
companies are decommissioning ships. Chairman of
the Maritime and Port Authority of Singapore
Lucien Wong calculates that 450 container ships,
or 10% of the global fleet, are now idle
worldwide.
All the problems stem from the drastic declines
in consumption in the West and production in the
East. Companies currently get around $500 to
ship a container from Asia to Europe, or $300
less than break-even. Compared to a year ago,
companies were collecting more than $1,500 per
container.
There
are some shipping companies that have remained
financially strong, however, and they’re accused
of fueling a price war to gain a large piece of
the market.
While
none of the major companies are turning a profit
right now, ones with backing from strong
corporations or governments are in a better
position.
Source: Commodity Online
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