Monday, January 26, 2009

Freight Rates Plunge as Huge Carriers Sail

The Wall Street Journal - Container shippers are unleashing a wave of titanic vessels on the oceans during the biggest dip in global trade since World War II.

The trend could keep sea freight rates depressed well into 2010. That's good news for their customers, the millions of businesses big and small that import parts and products from overseas. But it's likely to spell pain within the shipping industry itself and could precipitate consolidation as smaller players are pushed out.

The jumbo vessels -- many longer than three football fields -- carry everything from strawberries and tea to iPods and motorcycles, for thousands of customers at once. The economies of scale can be great if shippers can fill their holds.

The MSC Daniela is a glimpse of the future. The size of an aircraft carrier, the ship completed its maiden run from Asia to Europe this month packed with 13,800 containers, or equivalent units, each big enough to contain all the contents of a three-bedroom house.

Thirty-five ships of Daniela's scale are scheduled to hit water in 2009, doubling the number floating today. They'll make up roughly a quarter of the net increase in container capacity on the high seas. The Asian companies that make up 16 of the top 20 container shippers are also ordering the ships, led by China's Cosco Container Lines with 24. By 2013, some 200 ultralarge ships will be in service around the world.

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