Unlike most industries, the worst is yet to come for the international liner shipping industry, as we move past the anniversary of the 2008 financial crisis. Some segments, particularly container shipping, are worse off than others, and some carriers are also worse off than others, depending mostly on debt levels and new ships on order.
The mutually reinforcing elements of the liner industry’s downward spiral include a global market that has likely bottomed-out, but looks to be slow growth at best; excess industry capacity of about 20 percent, with new capacity equal to 40 percent of the existing global fleet on order; price levels below marginal cost; over-ordering and overcapacity combined with inflexible shipyards and conservative credit markets; and truly disastrous carrier results, with several carriers poised to report losses of $1 billion for 2009.
The downward spiral will not be reversed until there is a complete rebalancing of supply and demand. Recovery for the industry looks to be at least five years out. There is little on the short-term horizon other than continued service restructuring, cost cutting, and some business failures. Looking longer term, there will have to be a major restructuring of the liner industry, with considerable risk that only those carriers with government ownership or major direct or indirect financial support will survive.