By Alexander Jung, Thomas Schulz and Wieland Wagner
But even bankers are not willing to claim that the crisis is simply bypassing the Hamburg shipping industry. "The current market downturn will certainly create consolidation pressures. Those who borrowed too aggressively will run into problems. Stronger market players will be quick to take advantage of this," says Kuznik.
It is in the interests of the entire industry for container operators to remain solvent, warn the consultants at Drewry. Banks and independent ship owners also stand to lose a great deal if any major companies fail.
This was the reasoning behind the move by Hamburg bankers and shipping company owners -- most notably HSH Nordbank and Peter Döhle -- to rescue the troubled Chilean shipping line operator CSAV two months ago. In return for shares in the company, the Chileans' loan payments were reduced by a third.
Hapag-Lloyd, in a letter it wrote in late June to the owners of the ships it charters -- including Döhle and Rickmers -- accused them of "distorting competition" and requested talks "on extending the charter contracts at reduced rates." The effort apparently paid off, according to Hapag-Lloyd, which says rates are now up to 30 percent lower.
A Glut of New Ships
But the real problems are still ahead for German shipping companies. The 1,550 new ships that were on order in mid-2008 are to be delivered in the next few years. The major Asian shipyards are unwilling to accept cancellations.
Some ship financiers have already decided to forfeit down payments already paid to the shipyards, which can amount to up to 40 percent of the total price, because they lack the additional millions needed to take delivery of the ships on order. Most others are trying to negotiate with the shipyards to at least delay construction, in the hope that the situation will improve significantly in a few years.
The orders for new container ships now on the shipyards' books represent a total capacity of 5.3 million TEUs, or about 50 percent more than current worldwide container fleet capacity. Even if global trade recovers by next year, this glut of new ships will create enough excess capacity to depress shipping prices.
To reduce loading capacity, ships are already being decommissioned today, and they now lie at anchor, unused, in ports, estuaries and bays around the world. Ironically, most of these idle ships are at anchor off one of the most important arteries for world trade: the port of Singapore.
A visit to this final resting place of the products of globalization involves a 45-minute boat ride into the waters off Singapore. The armada of decommissioned ships at anchor there -- all classes of tankers and freighters, as far as the eye can see -- is an eerie sight.
About 130,000 ships put into the Singapore harbor each year, normally remaining there for only a few days at a time. A year ago, shipping was booming in Singapore, as heavily loaded container ships cruised out of Singapore into the Strait of Malacca, headed for Europe or, traveling in the other direction, for China, Japan and South Korea. In 2005, Singapore replaced Hong Kong as the world's largest container port, processing 29 million TEUs a year.
Of course, many freighters still dock at the port of Singapore today, but they are carrying almost 25 percent fewer containers than last year. And each time they pass the fleet of decommissioned ships anchored off the Singapore coast.
There are few signs of life on board the idle behemoths. The shipping companies have sent most of their crews home, often to the Philippines. The skeleton crews left behind spend their days servicing the engines and applying paint to rusty spots.
10 Percent of Global Fleet Idle
Lucien Wong, the chairman of the Maritime and Port Authority of Singapore, reported in April that roughly 450 container ships are now idle worldwide -- about 10 percent of the global fleet.
A few thousand kilometers farther north, in the city that hopes to position itself as the world capital of globalization, the consequences of the crisis are also obvious. The Shanghai Shipping Exchange has become noticeably quiet. An illuminated panel in the lobby offers numerical evidence of the decline in container traffic. A graph depicting the China Containerized Freight Index has been headed dramatically downward since last year.
In June, Chinese exports were down 21.4 percent compared with the June 2008. Nowadays, messengers working for the shipping companies show up at counters in the exchange building with little more than a few forms to be stamped. A year ago, their jobs consisted of lugging around thick stacks of documents.
The office of Wang Jianmin, the administrative director of the Shipping Exchange, is underneath the illuminated panel. The Chinese notice immediately when the flow of trade to and from China declines. As far back as July 2008, says Wang, even before the Wall Street crash, he noticed that container processing volume was suddenly down in Shanghai.
Wang, who takes an international approach to things, uses Jimmy as his first name on his business cards. He has visited many of the world's ports, and the Chinese government hopes to draw on his experiences for an ambitious propaganda project it recently launched: By 2020, Beijing wants to expand Shanghai into a major center for global shipping.
Shanghai's Ambitions
Wang believes that the current crisis in shipping creates an opportunity for Shanghai to catch up to foreign competitors. For this reason, notwithstanding the crisis, the Shanghai city government is currently hell-bent on expanding the harbor and local shipyards.
The Yangshan deep-water port off the Shanghai coast is a symbol of China's determination to continue growing, no matter the cost. Because the waters near the city are too shallow for large tankers and container ships, a rocky island in deeper waters was leveled and transformed into an enormous terminal. Current plans call for Yangshan to have 30 terminals, capable of processing 15 million containers a year, by 2020.
China is also pursuing ambitious plans to develop its shipbuilding industry, which include the People's Republic displacing neighboring South Korea as the world's largest shipbuilding nation. Farther north, in the waters off the Yangtze River delta, Shanghai is expanding Changxing Island into a massive shipyard complex.
Changxing was once home to primarily fishermen and orange growers, but now this formerly idyllic place has given way to a major construction site. Several government-owned shipyards, including two owned by the China State Shipbuilding Corporation (CSSC), are already building ships on Changxing. In the summer heat, armies of shipbuilding workers weld rust-brown steel parts together to make freighters, while construction crews nearby erect assembly buildings and housing for workers. The government press reports that the island's population will double to 200,000 by next year.
'There Isn't Much Left to Do Nowadays'
China's plans are still based on the wild boom years. But hardly anyone in the shipping industry believes that sufficient numbers of ships will be ordered in the medium term to ensure that the country's giant new shipbuilding complexes can operate at anything close to their capacity.
Although the Chinese state-owned operations are unwilling to comment officially on the situation, it is impossible to fully conceal the evidence of the downturn. By half past four in the afternoon, workers at CSSC are already leaving their posts, headed for the cafeterias across the road from the shipyard gate.
"In the past, we worked in two shifts, until 3 a.m.," reports one of the men, wearing a beige uniform. He is unwilling to state his name, fearing that he could be accused of revealing state secrets and lose his job. His work consists of carting vats of paint around the shipyard on his bicycle.
"But there isn't much left to do nowadays," he says. His wages have been reduced to 2,800 yuan a month (roughly €280), compared to the 4,000 yuan he earned during the boom.
A giant billboard at the pier touts the expansion of Changxing into a shipbuilding center, calling it part of China's "national strategy." Although Beijing responded to the crisis by putting a freeze on construction of new shipyards for the next three years, many of the biggest projects have been underway for some time and are continuing.
With government backing, investors in the northern Chinese port city of Tianjin have established a shipbuilding investment fund. Its goal is to acquire shares in ailing shipyards, support mergers and acquisitions and buy up ships for which orders were cancelled. This is part of China's strategy to help its shipyards survive the crisis.
Whether the plan will succeed depends in large part on the world and US economies. "The US economy needs to recover before global trade can start growing again," says Kühne + Nagel executive Lange.
The Situation Is 'Not Good, Not Good'
There is little evidence of a recovery in the port of Charleston, South Carolina. There is only a single ship, the MSC Prague, docked at the wharfs in one the biggest ports in the United States. Only last year, brand-new, giant cranes were installed at the Charleston terminal. Many of them are now idle, partly because orders are sharply down among German machine-building companies.
Forty-five percent of US imports of German goods pass through Charleston. Containers owned by German shippers like Hapag-Lloyd and Hamburg-Süd are stacked high in the harbor. BMWs, fresh off the assembly lines, stand in endless rows at the wharf. They include SUVs produced at the company's nearby plant, bound for Europe, as well as 3 series and 5 series cars intended for the US market.
Port spokesman Byron Miller, who wears a German flag pinned to his lapel, smiles cheerfully. But his mood changes the minute he is asked about the situation, which he characterizes as "not good, not good." Between July 2008 and May 2009, the number of containers arriving at Charleston from the northern European region, the point of departure for German goods, declined by about 100,000. Total volume at the port has dropped by almost 18 percent.
Under a port expansion project just approved last year, a new terminal scheduled for construction by 2014 would add roughly 50 percent more capacity.
Charleston is not alone. Almost everywhere in the world, feverish efforts have been underway to expand new port complexes or build entire new ports to accommodate both the surge of demand for port capacity and the giant new container ships that existing port facilities were too small to handle. No economy, it seemed, could afford to allow its access to the highways of globalization to become clogged because of lack of capacity.
But what happens now that the traffic jam has cleared up? The experts at Drewry estimate that it will take until 2012 before container turnover returns to 2008 levels.
Despite the downturn, the construction is still underway in Charleston. "But there probably isn't a port anywhere in the world where they aren't thinking about a delay," says Miller. In Dubai, for example, harbor expansion plans have been postponed indefinitely.
Hamburg also has a €750 million expansion program in the works. For years, the city had Europe's fastest-growing port, with turnover tripling within 10 years to almost 10 million containers, and port officials had even predicted that number to increase to 20 million by 2015. But now no one believes those forecasts will materialize. In fact, turnover declined by 25 percent in the first quarter of 2009, and Hamburg's original expansion plans have now been put on hold.
"And why, after all," says a Hamburg shipping manager, "should billions be spent for ships that may never arrive?"
.Translated from the German by Christopher Sultan
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