A Helm to Grasp, A Course to Steer, A Port to Seek

There's an interesting article in the Economist on a probable decline in the shipping industry, Heavy weather, A golden era for shipping may be coming to an end. According to the article the combination of a large increase in shipping capacity and higher costs, with a 5 month decline in shipments from Asia to America is driving down the profitability and share value of shipping companies. This is following a hugely profitable period for shipping. But, there have been increases in shipments from Asia to Europe with the increase in value of the Euro, and "the sharpest increase" is in shipments from America to Europe and Asia with the decline of the dollar.

Here are some key stats and figures from the article:

• The share prices of Pacific Basin and Jinhui Holdings have "increased fivefold between the middle of 2006 and the middle of 2007."
• "Staggering sums were made in private transactions" of ships:
• "[A]n iron-ore carrier built for $31m in 2001 was sold for $150m in 2007."
• "[A]n oil tanker bought for $142m and still under construction was recently resold for $168m."
• "Pacific Basin announced annual profits of $472m, up 328% on the previous year, but its share price is down almost 30% from its peak last November."
• Jinhui's shares are down even more from their November 2007 peak, and they canceled construction contracts on two iron-ore carriers, "worth $123m each."
• "About 60% of the global capacity is about to be floated, adding to a huge increase in supply."
• Oil prices are up, crews are in low supply, and inflation is driving up cargo value and insurance costs.
  

There is dispute over whether the shipper's problems stems from America's subprime mortgage debacle, or from a slowing demand for shipping right as supply is increasing.

The article writes that affirmative steps are already being taken to deal with the decline in shipping: Maersk Line is planning vessel sharing with competitors, and Neptune Orient Lines was discussing consolidation with TUI, until talks allegedly broke down.

An economic downturn, or recession or whatever they call it these days, is a great time for buyers. Sounds like it's also a great time for importers & exporters, too. As long as you have customers looking to

[A big shout out to Henry B. Adams for the title. Other quotes in the running included, "To reach a port we must sail, sometimes with the wind, and sometimes against it. But we must not drift or lie at anchor," by Oliver Wendell Holmes, Jr.; and "A ship in port is safe, but that's not what ships are built for," by Rear Admiral Grace Hopper.]