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SINGAPORE: The shipping industry is in for some choppy times ahead. Already, freight rates and transaction numbers are falling in line with the global downturn.
Neptune Orient Lines, the world's seventh largest container line, is taking new measures to stay afloat, including cutting 1,000 jobs worldwide.
After the boom in the last five years, many shipping lines are now having to deal with excess capacity.
Ken Tai, technical strategist, KE Live Research, said: "Just look at the anchorage at the East Coast Park and you'll notice a lot of vessels and that actually suggests the industry is actually not doing that well.
"These shippers depend a lot on their freight rate. These freight rates are actually declining and with the volume declines, trade between countries start to decline. It's going to be a double whammy situation for these shippers."
Industry watchers said the value of ships has dropped by as much as 70 percent and that is fuelling even more pessimism going forward.
Joachim Skorge, managing director, Investment Banking, DnB NOR Bank ASA, said: "I also think we will see yard cancellations because currently there is a significant oversupply of dry bulk and container vessels.
"I think a lot of people are worried (about) what's going to happen if all those vessels are being delivered and demand is not picking up.
"I also think we'll see some shipping companies forced to sell certain assets in order to improve their balance sheets because many players have been buying vessels at high prices and prices have been coming down sharply. That means they need to do certain things to improve their balance sheets."
Some observers predict the sector may only start to see a recovery at the end of next year. Until then, they said shipping companies with cash on hand could use this time to purchase assets cheaply and position themselves for the upswing.
During this time of the year, the container industry is usually very active for the festive holiday season.
However, observers said one indication that the industry has been hit by the global downturn is that the container terminal is not as full, and containers are not stacked as high, as before. - CNA/vm
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