One of the better podcasts I’ve been listening to recently is Planet Money. In the latest episode (iTunes link), they look at a ‘ghost fleet’: large cargo ships, idled by the global recession, are parking off the coast of Singapore. They’re not really supposed to do so, and the owners certainly don’t want to park that much capital, but there’s not enough business to keep them afloat, at the moment. According to the podcast, all these ships dropping anchor are damaging underseas cables and making a mess of the sea bottom.
Thought that was interesting, so I poked around to see what I could find. Wow. Check it out.
Flew over them last night, actually. And here I was thinking that singapore must be booming something fierce with all these ships waiting to unload. I lived by Kits in Vancouver, so I have some idea about the number of container ships that regularly come into the harbor of a big city.
I must say, it is an impressive sight at night.
Interesting. Every day I drive home along the banks of the Elizabeth River where it dumps into the southern end of the Chesapeake Bay. Lots of container ships. For several months now I’ve noticed what seems to be a lot of idle loading capacity everywhere.
Yesterday I was talking to a banker about long term interest rates and where they’re headed (or rather, how soon they’re headed up). Pretty soon everybody in the room is talking about how low inventory levels are everywhere. At Wal-Mart, Home Depot, etc. Somebody mentions that a local Wal-Mart sold out its Easter candy inventory Thursday evening, which is very rare and would seem to provide some evidence of razor-thin inventory. Wal-Mart is usually very good at avoiding a holiday stockout, world class in that exercise.
Demand has plummeted but supply increased because of the 2001-2008 boom. Steamship lines invested in new, much larger vessels (up to 14,000 TEU’s) as a result of the boom and now there is a lot of excess capacity. All those vessels parked off Singapore are a result of the steamship lines meeting in conference and agreeing to cut capacity to try and drive prices back up. Maersk, the largest steamship line, lost 2.09 Billion dollars in 2009 and this is a way to try and recover it.
To give an example of how bad it is, China Shipping has 21% of their fleet idling, Zim lines has 20%, Hyundai has 16%, K-Line has 15%, APL 14% and Hapag-Lloyd has 2%. It’s not great for the environment, but they don’t want to scrap the ships either for the eventual recovery.