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The solutions to the global crisis affecting the maritime industry

The solutions to the global crisis affecting the maritime industry

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The global crisis that the maritime industry has been suffering for several years is not over. The lack of cargo, excess holds, and some freight rates are rising somewhat in the Atlantic and the Pacific of South America.

The world is in crisis: Greece, Spain, Italy and most European countries, and even the United States. Industrial countries, suppliers of technology and comfort, export every day less and less of everything, because half the world has lost purchasing power and the only active exports are those from countries that produce food and raw materials.

Maritime transport works with a certain amount of success when it comes to minerals, fuel, natural gas and food. The consequences are obviously being suffered by the shipping industry which has been submerged for years in a trade crisis: there are plenty of ships, which means there’s more space being offered than there is cargo. Advancements in technology are trying to save the shipping situation by making vessels that are over 15 years old and with old engines obsolete, and replaced by new, more economical ones, that are efficient and with a higher capacity. No less guilty than the global crisis have been the high oil prices that have played a part in doing their thing in the world. So much so, that is is usual among shipowners to slow down ships to decrease fuel consumption.

Changes in recent years

In 2012, 82 ships were scrapped of between 1,000 and 2,500 TEUs and shipyards delivered in that same period 43 new ships. Moreover, in the second week of February 2013 there were 318 idle ships, a third of which ranged from 1,000 to 3,000 TEUs. At the end of 2012, container ships came to 5,040 units with a carrying capacity of 16.2 million TEUs. In 2013, Asian shipyards delivered a total of 197 containers with a total capacity of 1.2 million TEUs, which gives an average of ships of 6,000 TEUs. Another report said that in 2013 the shipyards delivered a total of 40 ships for 10,000 TEUs, which took some time to incorporate into the service while the old ones were removed. Yes, the struggle for each container has led to getting rid of the old, expensive ships and replacing them with today’s huge ones. During the crisis, the solution is to invest more to spend less, and just sitting and hoping for the best. There is a clear oversupply of holds and even though there was a surge in cargo to Europe, there isn’t enough cargo for all ships, although the most prestigious lines and those in the first rank fall into place as they can and sort the situation out. Oversupply of holds has pushed down freight rates and has led to another measure, the joint ventures, to reduce, between two or three shipping companies, those empty holds, when they use the same service. Those with enough cash have been coping with this situation for several years with success, just like the large ones that we all know today, and if it’s possible and they can no longer withstand this, freight rates are increased a bit as it’s happening now.

Image courtesy of Cycling man at Flickr.com
Image courtesy of Cycling man at Flickr.com

For some time now the world has been talking about ecological issues, and it is intended that the ships and their activity today are the least polluting in the seas and in ports, and these two goals are not met by the old ships, the 15 year old ones. Talks are being held about natural gas powered ships by 2020, which will be cleaner and cheaper. And of course the mega containers are already set up for an economy of scale and survival. It is known that a ship of 5,000 TEUs has the same fixed budget that one of 9,000 TEUs, so the bigger ones must be used to compete with existing rates. It is also true that today many shipping lines that have existed for decades, pressured by their deficits, are increasing freight rates, and this has been seen in services to Europe and South America. To sum up: the containerized shipping industry has been struggling with the worst crisis in its history, caused by a weak global economy, oversupply of vessels and low freight rates.

As we said, to reduce oil consumption in the old ships, the solution has been to lower the speed of said ships and this has helped a little. If the speed of the ships was increased by no more than 0.2 knots per month, that would be like adding to the current market nine tankers of the VLCC type, those of 300 thousand tons. Besides, the new ecological ships with more efficient engines save 30% more fuel than they did five years ago.

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