[EN-SEA] Reuters: Container Carriers See Storm Cloud Clearing

THE global shipping downturn is showing signs it has found a bottom as container freight rates recover to "near breakeven levels" though carriers are not expecting any quick return to the good old days, according to Reuters.

The British news agency analysis emerges with the warning that it could take years before they see a return to levels enjoyed before the global downturn that knocked the wind out of the industry's sails in last year's fourth quarter.

To highlight how low the industry has sunk, the report noted that Hong Kong's shipping company Orient Overseas (International) Ltd recently posted a 42 per cent drop in shipping revenue for the third quarter.

Freight rates, it noted, fell to zero on some trade routes as demand dried up last year forcing container shipping lines to lower their prices to cover only fuel and terminal charges.

But, said Reuters, the container shipping crisis appears to be over, driven by market sentiment that "improving global trade and China demand could help these companies to float again". Cosco, for example, has raised its freight rates three times from July to September, restoring them to near breakeven levels.

"The first and second quarter were the most difficult and now the whole economic situation is moving in a positive direction," said Cosco corporate secretary Zhang Yongjian.

It's a view shared by Denmark's Maersk Line, the world's largest container carrier, which expects freight rates will reach breakeven levels by the first quarter of 2010.

But clouds still remain, not least the oversupply of capacity, which has reached record highs and is a problem that is expected to haunt the industry for years, putting profits under pressure.

"Many shippers are burning through cash quickly, which will make it difficult to pay off ships they ordered in better times," the report said. According to analysts, the container shipping industry needs to consolidate to become more efficient.

But Reuters maintains it is unclear when that will happen as they "lack money for mergers and acquisitions and some operators could even go bust," it said.

"Who wants to buy ships? There is no price and market for containerships," said Stanley Shen, a spokesman for Hong Kong's Orient Overseas Container Line (OOCL).

Source : HKSG, 26.10.09