Shipping downturn in China worse than in 2008

The fate of individual logistics markets is not just dependent on the wider economy; they are individually capable of damaging themselves.

Li Shenglin, China’s transport minister, asserted last week that he would move to control the level of ship building in the country. Speaking at a shipping conference in Hainan, he is reported by Bloomberg as saying that the present state of the shipping market was worse than that experienced in 2008 and that the Chinese state would look to "guide the orderly arrival" of new ships into the container and bulk sectors.

In part, Li Shenglin’s remarks reflect the particular pain being felt by both Chinese ship-builders and Chinese shipping companies. Both have been hit hard by the falls in rates in the bulk and container sectors. Chinese ship-builders aggressively entered the market for smaller container vessels and bulkers, flooding the market with vessels that are often financed by Chinese state banks. With the sector now heavily over-ordered and buyers more interested in the large ships built by Korean yards, the Chinese are suffering.

In addition, Chinese shipping companies such as COSCO and China Shipping Container Lines have slipped into loss recently. These state-owned companies have moved aggressively to grow market share, but they still lack the economies of scale of the market leaders and are suffering particularly badly in the present environment of low rates.

Yet is it important to note that the container market at least, is still growing. The most recent forecasts from the big forwarders, for example, are suggesting expansion of around 4 or 5%; this is in contrast with air freight which continues to see no growth.

It is clear that the current uncertain conditions experienced by the shipping sector are as much the fault of too much capacity as of poor levels of demand. It is likely that that those at the smaller end of the market are likely to suffer the greatest pain; something that may be amplified by the aggression of Maersk as it seeks to leverage the productivity of its huge vessels.

Therefore, Li Shenglin may well be right; the forthcoming twelve months could be very painful for the Chinese shipping sector.

Quelle: eyefortransport
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