Author(s)： Bomboma Kalgora, Tshibuyi Mutinga Christian
The container shipping, the important beneficiary and the major element of globalization, has remained a way of moving goods all over the world at an ever-increasing pace since not long ago. With China becoming the world’s factory, the industry has known a sustained and rapid growth from year to year. Many among ship owners, bankers, and investors during this period of boom in the shipping industry, become very rich. The availability of cash, with the construction of more technologically advanced ships, with the expansion of ports and the introduction of new shipping services, the cargo capacity in terms of twenty-foot equivalent units (TEU) of the world container fleet, had more than tripled between the years 2000-2009, reaching 12.5 million. But now, the well-known global financial and economic crisis of 2009 had almost overnight suppressed the growth of the container-ships market. In fact, for the first time in the history of the maritime industry, growth has stopped and there is even a steady decline in the rate of containers shipped around the world. In the first six months of the year of the crisis alone, the shipping industry declined by close to 16% causing huge losses.
The shipping industry is not immune from an economic recession. This fact was known from the global financial and economic crisis of 2008, which had a strong impact on the shipping market. The shipping is the faithful servant of global trade and a fulcrum of economic growth, facilitating an estimated 90% of global trade volume. The world is more dependent on it than ever. As such, the industry is influenced by factors such as economy, trade, production, consumption, politics, financing and technology that drive the demand and supply of manufactured goods, raw materials and shipping services. A drastic decline of freight rates and time charter or in the fore mentioned factors, is almost immediately visible throughout the shipping market. For the first time since 1982, the world’s GDP decreased by 2.2% while the international trade rate dropped by 14.4% . Therefore, the curtailment of economic activities and consumption has resulted in a drop of trade volumes and low demand for maritime transport. Just as the shipping industry enjoyed a spectacular booming during the mid-2000s when the global economy performed well; its fortunes were also inextricably related to the recent slump in the global economy. It is therefore not surprising that the shipping market has suffered along with the global financial and economic crisis.
The 2008 crisis had been the longest and most severe downturn for the modern merchant in the history of container-ships market. The freight rates in key container shipping trades, have slumped to nearly all-time lows, as ship owner struggled with low demand for their vessels. At this point, the global financial and economic crisis is wreaking havoc on container-ships market; the demand and prices have collapsed and ports are filled up with fleets of empty freighters.
The crisis has fueled a cut-throat competition, and not all shipping line companies can survive. This paper aimed to present the impacts of the global financial and economic crisis of 2008 on the container-ships market and mainly drew lessons from them. The recent fall in freight rates is a challenge to ship-owners, ship-operators and analysts of the maritime economy. The crucial task is to succeed in employing the ship in a way to achieve the break-even point, or at least to cover the variable operating costs in a short time.
The remainder of the paper is structured as follows. Section 2 discusses the booming period of container-ships market, and the harbinger of the crisis. Section 3 investigates the factors worsening the crisis in the container shipping sector. Section 4 enumerates the consequences of the financial and economic crisis on that segment of the shipping industry. Section 5 develops the opportunities birthed from the crisis. Section 6 suggests the possible adjustments during the crisis in the container-ships market. Finally, Section 7 concludes.
See also: Comments to Paper