Recovery Beyond the Crash of 2009

This is not the first time that the industry has faced the depth of despair, it happened in the periods 1973-75, 1982-83, 1991, 1997-98 and most recently in 2001. Certainly this rececession, or near depression, is the worst since 1929 but it is not permanent.

What has brought us to this low and what are the signs of hope? Let us not put all the blame on the finance houses and banks. We need to also consider the boom conditions that led to large profits in the industry.

The bulk owners were the first to benefit through most of this decade as China went on an infrastructure development binge, followed by the container lines suddenly seeing returns on investment unheard of for years as the switching of resourcing created globalisation in trade. As this boom accelerated, boardroom memory was suspended.

The orderbook expanded beyond belief, driven by institutional investors, speculative investors in Germany and owners all vying with each other to order ever bigger ships. China and the impact of globalisation was not expected to change, yet it did and here we are with an overhang of ships and the resultant fight for market share driving carriers into huge losses.

Looking beyond 2009, the industry is increasingly suggesting that this recession will not be resolved until 2011, yet looking back as far as the 1973 recession we can see that there is no precedence for this. Virtually every recession ends with a surge in trade as the lack of inventory to feed renewed consumer demand creates trade growth. This will be particularly true in this cycle as the collapsed banking system has seriously impacted trade through loss of credit facilities.

The industry will change with bankruptcies and M&A; new players will appear and ships will be scrapped, but do not doubt that trade will return as it always has done. This Economist believes that 2010 will be a recovery year. It is in the numbers.