Shippers Are Now Slashing Capacity Because They're Terrified Of An Ugly Christmas Season

The Business Insider ^ | 10-4-2010 | Vincent Fernando, CFA

[blam]

Shippers Are Now Slashing Capacity Because They're Terrified Of An Ugly Christmas Season

Vincent Fernando, CFA
Oct. 5, 2010, 10:55 AM

The unemployment rate is set to soar -- for container ships -- according to the Paris-based firm Alphaliners via Journal of Commerce.

While there are currently about 225,000 TEU's-worth (twenty-foot-containers) of container ships sitting idle, this figure could hit 600,000 - 1,000,000 TEUs by the end of the year. This means that the idle fleet could more than quadruple.

“However, the decline of the containership fleet looks certain to be reversed in the next few weeks as seasonal volume reductions are due, especially on the Asia-Europe trade where some 10 percent of the ships currently deployed could be removed," warns Alphaliners.

The CEO of Maersk Line, the largest Asia-Europe player, even corroborated this view. Maersk is planning to slash active capacity in Q4, because as its CEO says, "There will be simply too much capacity in the market, so our response will be to take out some capacity from the start of October."

Prepare for more pics of idle ships surrounding hubs like Singapore, similar to what we saw in the aftermath of the recent crisis. Christmas won't be so merry for those out at sea.

[snip]

[blam]

BTW, didn't we just read that railroad shipping is up substancially?

Meanwhile, the DJIA is surging and is up 163 as I post. See here.

[refermech]

Good, maybe I can pick up a couple of those shipping containers to live in...

[Sacajaweau]

It was....that we all waited till Christmas to buy special things. Now, we just go out and buy it and worry about Christmas later.

[mazda77]

Bad links to the original article. The one you put up there takes me to my pings page.

[OCCASparky]

Meanwhile, the DJIA is surging and is up 163 as I post.

Further proof that what's good for Wall Street isn't necessarily good for Main Street. And the analyists that say we're only at a very small chance of a "double dip" recession? What do they say about the volume of tax increases that are going to hit the average American on January 1st?

[perfect_rovian_storm]

The Dow is ‘surging’ because it is valued in dollars and the dollar is falling.

[petercooper]

http://green.yahoo.com/blog/daily_green_news/8/twelve-amazing-shipping-container-houses.html

[wbill]

This article, while a bit troubling, is offbase.

All of the XMas stuff is here already. If it's still on the boat, it ain't gonna be on the shelf by Christmas.

It would be more accurate to compare October 1 shipping amounts to last year, or maybe the last 5 years, then look for trending.

But, that wouldn't get lurid headlines.

[evets]

[NonValueAdded]

Is the timing right on this? Given how early this stuff appears in the stores, hasn’t the Christmas import season pretty much ended? I don’t think there is much JIT inventory in retail.

[Vince Ferrer]

Shipping has recovered strongly since the depths of the recession, but there is an unknown portion of that which was simply rebuilding inventories expecting a green shoots/ "V" shaped recovery. I would expect come Christmas, with the economy not doing better and of course jobs not improving, that shipping will return to an "L" shaped recovery mode.

Long term, the currency wars and rising protectionism feelings does nothing to help shipping. Shipping companies have largely felt immune from these forces, as they feel they can reallocate ships to whatever area of the world that is doing well. That theory is going to continue to be tested in the near future, as all areas are hurting simultaneously.

[Jack Hydrazine]

"Good, maybe I can pick up a couple of those shipping containers to live in..."


And turn them into something like this!

[blam]

I’ve been thinking about putting a couple underground.

[Vigilanteman]

There was a time that surplus in ocean shipping capacity led to rate cuts in order to keep the vessels running mostly full.

Now, it just leads to more capacity being idled so the shipping lines can charge more for the diminishing capacity which is available.

I've been involved in the business for more than 20 years and have never seen shipping capacity this tight. It is not just containers which are being idled, but entire vessels.

Everybody wants to get out of the risk of actually producing a good or service and more into sure things like crony capitalism and suckling the government teat. We won't have a full economic recovery until that mindset changes.

[AmusedBystander]

Go to your local Walmart and you will notice the extra wide aisles that were once so narrow barely one cart could go through.

Notice the limited number of choices of competing products on the shelf and how the stock there does not go all the way to the back of the shelf.

That is the state of the economy. Hunkered down and very little inventory.

Not going to get better until years after Obama retires.

[refermech]

I like it! But then again I’m a mechanic and I always said I could live in a garage! LOL!!

[Seniram US]

My son is living in a container on a base in Afghanistan. He is moving up in the world. Initially, he shared the quarters with a major, but now he has his own (air conditioned and telephone).

[1010RD]

I noticed that yesterday. Stocks are really thin and shelves aren’t really full at all for many products (slow-slower movers).

[deport]

All of the XMas stuff is here already. If it’s still on the boat, it ain’t gonna be on the shelf by Christmas.

---

I passed by a Walmart container facility that receives TEUs from the port about a month ago and that facility was basically full with little room for more containers to be received.