The littered road to recovery

Virtually all players in the industry have broad smiles on their faces. However, there are of course some exceptions and some surprises.

With relatively few orderbook cancellations, and a string of new orders from the likes of APL and Evergreen, the shipbuilders are also in a relatively buoyant mood, to such an extent that some are considering refusing new orders in the expectation that shipbuilding prices will also recover.

The non-stop announcements of general rate increases in the container sector, combined with new surcharges, some levied, others not, has turned that sector around in a way that was wholly unexpected. But we must remember that this is an industry infused with an uncertainty that functions on long term investments (ships) combined with short term strategies (pricing).

2010 will undoubtedly be a year of serious profits due to the lagging nature of prices to demand and we are now so far into the year that any weakness in demand will have no impact.

Most of the laid up capacity is now back in play, slow steaming of course, but nevertheless on the high seas. Container shortages are a thing of the past and there are even some experts predicting port congestion, although I am not sure on what premise that is based on.

Yet the way forward remains uncertain and is littered with economic realities that could cause the recovery to falter.

The North American market is completely unsure of itself as consumers take cover in a climate of collapsing home sales and consumer confidence. Savings ratios are way up, even after debt is being paid down. In Europe, the austerity packages are beginning to have an impact as unemployment, and thereby consumer demand is impacted.

The only bright light is Germany where export growth dominates, but this depends on a robust China. A double dip recession is still not in sight, but it is lurking in the shadows.