Amid Industry Downturn, Global Shipping Sees Record-Low Growth | KERA News

Amid Industry Downturn, Global Shipping Sees Record-Low Growth

Aug 20, 2016
Originally published on August 20, 2016 10:21 am

The massive container ships that ply the high seas bring us pineapples and mangoes in winter, and computers and cheap t-shirts all year round. But the shipping industry is a volatile, cyclical and ferociously competitive business. There are good years and bad years.

And then there's this year.

"This is likely to be one of the worst years ever in terms of losses," says Janet Porter, editor-in-chief of containers at Lloyd's List, a shipping industry news provider. She says over the years, global shipping companies got used to growth of 6, 7 or 8 percent. This year it'll be close to zero.

"It is a very simple supply-and-demand imbalance — too many ships and not enough cargo," she says.

Container ships are vital cogs in the global economy. Jonathan Roach, a container market analyst at Braemar ACM shipbroking in London, says slowing economies in Europe and China are hitting the industry hard.

"China is a big factor in the container industry — where China is really the factory of the world and when the advanced economies slow, we're seeing less exports coming out of China," he says.

The economic slowdown comes as fleets of huge, new ships are coming online. The major shipping companies in Europe and Asia began ordering the state of the art, super-sized ships back in 2011, when times were better.

Porter says this is partly a self-inflicted crisis because many of the companies are over-ordering.

"There's a little bit of 'boys and their toys' in the shipping lines," she says. "One line will order so the next one does and the next one does, and now all these ships are starting to be delivered."

Now, orders for new vessels have dried up. William Bennett, a senior analyst at VesselsValue in London, which follows the cargo markets, says companies ordered about 1,500 new vessels in 2015.

In contrast, "What we've had in the first half of this year, we're looking at 293 vessels ordered," he says. "There's just no appetite for ordering at the moment."

Bennett says the shipping crisis will have little impact on consumers. He says shelves in your favorite shops will remain stocked.

It's the ship owners bearing the brunt, he says — they're hemorrhaging money at the moment.

Because of the glut of ships, freight rates have plummeted over the past year, cutting deeply into profits, says Nils Haupt, the communications director for Hapag-Lloyd, the world's fourth largest container shipping line.

"I can just tell you that the costs for shipping are enormously low," he says, adding that transportation costs for manufacturers are at rock-bottom.

"A t-shirt, just for shipping transportation, this is like one or two U.S. cents... a pair of sneakers which is $100 in the shop...ocean transport cost per pair approximately between 20 to 25 U.S. cents. So this is a ridiculous amount of money," he says.

For oil tankers, the situation is even more dire. Earnings at the turn of the year were around $50,000 to $60,000 per day. Bennett, with VesselsValue, says they're now looking at $1,000 a day. "So you can see the situation has gone incredibly sour," he says.

Bennett says shipping lines are looking to be more efficient and cut costs. He says mergers and acquisitions are happening at a record rate. And many ships are heading to scrap heaps, like the one in Alang, India — the world's largest — to help reduce the number competing for market share.

"We need 1,000 ships to be scrapped in order for a market recovery," he says.

At least that will be good news for the scrapyards.

Copyright 2016 NPR. To see more, visit NPR.


The cutest little thing was found on the ocean floor this week - a little googly-eyed purple squid off the coast of California. It looks like a close friend of Nemo. I'm joined now by Samantha Wishnak, who's a science fellow on board the Nautilus ship that captured the endearing cephalopod on video. Thanks so much for being with us.

SAMANTHA WISHNAK: Thanks for having us.

SIMON: He's just adorable. Is it a he, a she? What is it?

WISHNAK: We're not quite sure on the he or she of this squid. But we do know it is a stubby squid, or a North Pacific Bobtail Squid, scientific name Rossia pacifica. This animal looks like a cross between an octopus and squid but tends to be more related to the cuttlefish. As you can tell, it spends a lot of life on the sea floor. We encountered it sort of perched on the sediment with that now-famous googly-eyed expression.

SIMON: All purple and just has the most adorable little endearing eyes.

WISHNAK: Yes. We probably encountered this squid at a time it wasn't expecting to see a 5,500-pound underwater robot moving towards it.

SIMON: So he was just surprised?

WISHNAK: Right. Scuba divers actually encounter these squid at scuba diving depths, and they say that when, you know, their dive lights turn on them they get this similar kind of deer-in-the-headlights look.

SIMON: Yeah.

WISHNAK: They're actually nocturnal hunters, so they spend a lot of their day actually burrowed in the sea floor with just their eyes poking out. And then when they feel comfortable, when it's time to hunt, they'll come out and actually start creeping along, looking for their next meal. So I think we encountered a squid on the hunt that wasn't expecting to see us. But yes, this one is bright purple, which was pretty exciting for us to see. Definitely stood out against the mud of the canyon we were in.

SIMON: And he or she eats what?

WISHNAK: So these are squid that kind of hang out around the sea floor. They spend their day burrowed in the settlement with just their eyes poking out, so that's kind of their best form of camouflage. But they also have the ability to activate a little sticky mucus jacket. And once they've activated that little jacket, sediment - so pebbles, sand, whatever they're sort of burrowing in - will stick to that jacket and give it a nice extra layer of camouflage. So they lie in wait - they're ambush predators - and as soon as a small fish or a shrimp crawls by it, it'll actually sort of turn off that mucus jacket and slide out of the sediment to lunge for their next meal.

SIMON: Cute, but don't underestimate them.

WISHNAK: Exactly. Very cute, but definitely ambush predators you don't want to encounter if you're a shrimp.

SIMON: You're now docked in San Francisco, and I think that's pretty close to Pixar. I mean, any agents from that studio on board?

WISHNAK: (Laughter) Not that I know of. Maybe we have some sleeper agents. But one of the most interesting things about all the media requests we've received is that the media requests typically start out with, are you sure this is real? Is this a real animal? How do we know it's real? So I think it definitely captured the imagination of both our researchers on board and our hundreds of viewers who were watching as we discovered this guy.

SIMON: Samantha Wishnak, who's a science fellow aboard the Nautilus that discovered the squid. By the way, you can see cute squid pics on our website, Thanks very much for being with us.

WISHNAK: Thanks, Scott. Transcript provided by NPR, Copyright NPR.