Recent Developments in the Shipping Market
Recent developments in the shipping market are useful managerial reference for
shipping executives, and are summarized below:
• Stage of collapse: Between 1995 and 1998, the container shipping capacity
grew at a faster rate than demand. Together with the Asian financial crisis in
1997–1998, this imbalance in supply and demand caused a sharp decline in the
freight rate and profitability.
• Stage of trough: In 1999, an increase in demand for container shipping services
and a low delivery of new buildings led to higher freight rates. In 2000, freight
rates remained stable and the balance between container shipping demand and supply improved. In 2001, the growth in international trade was adversely affected
by the global economic slowdown, particularly in the USA, leading to
another sharp decline in the freight rate and profitability. Consequently, the
demand for shipping dropped dramatically.
• Stage of recovery: Led by increasing exports as well as imports, China’s economy
maintained a very positive development, and foreign direct investments in
its manufacturing industries persisted remarkably well (Christensen 2004). Owing
to the increasing globalization effect, demand for international container
trade showed strong growth during 2002–2003, and freight rates increased significantly
across the important trade routes.
• Stage of peak: In 2004, world shipping prices were steaming ahead at record
levels powered by China’s significant increase in demand for import commodities
and huge export of manufactured goods to the West. Second-hand
vessel prices were high and scrapping rates for old ships were very low. Owing
to a shortage of ships, shipowners placed a significant number of new orders
in 2004. More new ships were delivered and put into operation in the
shipping market; the shipping capacity available in the market became stable
in 2005–2006. With a big influx of vessel capacity into the market in the period
2006–2008, there was heavy downward pressure on the ocean freight rate
(Traffic World 2005).