Largest Fleet of Ships Ever Gathered Treads Water, Waiting For Cargo

http://www.nytimes.com/2009/05/13/business/global/13ship.html?hpw

Ships Tread Water, Waiting for Cargo

By KEITH BRADSHER
Published: May 12, 2009

SINGAPORE — To go out in a small boat along Singapore’s coast now is to feel like a mouse tiptoeing through an endless herd of slumbering elephants.

One of the largest fleets of ships ever gathered idles here just outside one of the world’s busiest port, marooned by the receding tide of global trade. There may be tentative signs of economic recovery in spots around the globe, but few here.

Hundreds of cargo ships — 100,000 to 300,000 tons each, with the larger ones weighing more than the entire 130-ship Spanish Armada — bob so empty that they seem to perch on top of the water rather than in it, their red rudders and bulbous noses, submerged when the vessels are loaded, sticking a dozen feet out of the water.

So many ships have congregated here that shipping lines are becoming concerned about near misses and collisions in the Strait of Malacca, one of the world’s most congested waterways.

The root of the problem lies in an unusually steep slump in global trade, a problem confirmed by trade statistics announced on Tuesday.

China said that its exports nose-dived 22.6 percent in April from a year earlier, while the Philippines said that its exports in March were down 30.9 percent from a year earlier. The United States announced on Tuesday that its exports had declined 2.4 percent in March.

“The March 2009 trade data reiterates the current challenges in our global economy,” said Ron Kirk, the United States trade representative.

Even more worrisome, despite some positive signs, including a Wall Street rally and slower job losses in the United States, many in the shipping business say the current level of trade does not suggest a recovery soon.

“A lot of the orders for the retail season are being placed now, and compared to recent years, they are weak,” said Chris Woodward, the vice president for container services at Ryder System Inc., the big logistics company.

Western consumers, still adjusting to losses in value of their stocks and homes, are in little mood to start spending again on non-essential imports, said Joshua Felman, the assistant director of the Asia and Pacific division of the International Monetary Fund. “For trade to pick up, demand has to pick up,” he said. “It’s very difficult to see that happening any time soon.”

The current downturn has so badly battered shipping that it makes the auto industry look healthy by comparison. For example, the daily rate to charter a large bulk freighter suitable for carrying, say, iron ore plummeted from close to $300,000 last summer to a low of $10,000 early this year, according to Clarkson Plc, a London ship brokerage.

The rate has rebounded to nearly $25,000 in the last several weeks, and some bulk carriers have left Singapore. But ship owners say that this recovery may be short-lived because it mostly reflects a rush by Chinese steelmakers to import iron ore before a possible price increase next month.

Container shipping is also showing faint signs of revival, but remains deeply depressed. And more empty tankers are showing up here.

The cost of shipping a 40-foot steel container full of merchandise from southern China to northern Europe tumbled from $1,400 plus fuel charges a year ago to as little as $150 early this year, before rebounding to around $300, which is still below the cost of providing the service, said Neil Dekker, a container industry forecaster at Drewry Shipping Consultants in London.

Eight small companies in the industry have gone bankrupt in the past year and at least one of the major carriers is likely to fail this year, he said.

So many vessels have flocked to Singapore because it has few storms, excellent ship repair teams, cheap bunker fuel from its own refinery and, most important, proximity to Asian ports that might eventually have cargo to ship.

The gathering of so many freighters “is extraordinary," said Christopher Palsson, a senior consultant at Lloyd’s Register-Fairplay Research, a London-based ship tracking service, "we have probably not witnessed anything like this since the early 1980s,” during the last big bust in the global shipping industry,

The world’s fleet has nearly doubled since the early 1980s, so the tonnage of vessels in and around Singapore’s waters this spring may be the highest ever, he said, cautioning that detailed worldwide ship tracking data has only been available for the last five years.

The Greeks and Persians had more vessels -- around 1,000 triremes -- at the Battle of Salamis in 480 B.C., Kublai Khan had more boats during his attempted invasion of Japan in 1281 and the Allies assembled more ships for the D-Day invasion in 1944. But those vessels were mostly tiny compared with the behemoths here.

These vessels total more than 41 million tons, according to Lloyd’s Register. That is nearly equal to the entire world’s merchant fleet at the end of World War I, and represents almost 4 percent of the world’s fleet today.

Investment trusts have poured billions of dollars over the past five years into buying ships and leasing them for a year at a time to shipping lines. As the leases expire and many of these vessels are returned, losses will be very heavy at these trusts and the mainly European banks that lent to them, said Stephen Fletcher, the commercial director of AXS Marine, a Paris-based consulting firm.

During previous shipping downturns, vessels anchored for months at a time in Norwegian fjords and other cold-weather locations with almost no one aboard. But stringent environmental regulations in practically every cold-weather country are forcing idle ships into warmer anchorages.

But that raises security concerns. Plants grow much faster on the undersides of vessels in warm water. “You end up with the hanging gardens of Babylon on the bottom and that affects your speed,” said Tim Huxley, the chief executive of Wah Kwong Maritime Transport, a Hong Kong-based shipping line.

One of the company’s freighters became so overgrown that it was barely able to outrun pirates off Somalia recently, Mr. Huxley said. The freighter escaped with 91 bullet holes in it.

Another of the company’s freighters was hit close to Singapore on Christmas Day by a chemical tanker that could not make a tight enough turn in a crowded anchorage; neither vessel was seriously damaged and there was no spill.

Captain M. Segar, the group director of Singapore’s port, said in a written reply to questions that many vessels are staying just outside the port’s limits, where they do not have to pay port fees.

Singapore has complained in the past two weeks to the home countries where ships are registered in the cases of 10 to 15 ships that have anchored in sea lanes in violation of international rules, Captain Segar said.

With fewer ships needed on the high seas, they are piling up at ports around the world.

There were 150 vessels in and around the Straits of Gibraltar on Monday, and 300 around Rotterdam, according to Lloyd’s Register.

But Singapore, close to Asian markets, has attracted far more.

“It is a sign of the times,” said Martin Stopford, the managing director of Clarkson Research Service in London, “that Asia is the place you want to hang around this time in case things turn around.”

 

Sell Everything everyone!!

Another scary post.

Maybe the market will go down, so i can breakeven after the rally of 35% in my face.

 

If you don't actually pay attention to the epic signs, you will end up penniless, without enough money for a pearl necklace you so fancy, and your gay male customers without enough money to give you that pearl necklace they so fancy.

 

The largest armada ever assembled, bobbing empty in port in the sea, waiting for goods that are not coming, as people have literally quit buying all but non-essentials, and as businesses have cut back to obsessive levels in terms of what and how they buy equipment and supplies, and as other businesses fail.

The Q2 numbers bear this out.

Mark these words: Q3 will make Q2 look tame by comparison.

"The current downturn has so badly battered shipping that it makes the auto industry look healthy by comparison. For example, the daily rate to charter a large bulk freighter suitable for carrying, say, iron ore plummeted from close to $300,000 last summer to a low of $10,000 early this year, according to Clarkson Plc, a London ship brokerage.

The rate has rebounded to nearly $25,000 in the last several weeks, and some bulk carriers have left Singapore. But ship owners say that this recovery may be short-lived because it mostly reflects a rush by Chinese steelmakers to import iron ore before a possible price increase next month."


$10,000, and most likely $5,000, is on the way back.