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:
- The giant ships are sailing half-empty or left docked in harbors.
- Billions are still being spent on ports with diminished traffic.
- Bankruptcy looms over leading shipping line operators, shipping banks and charter shipping companies.
- 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.
- Claymore/Delta Global Shipping (SEA): up 22.8% year-to-date
For more information on shipping, visit our shipping category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.