The Container Situation

Every few months I touch base with Tom Kim, the Hong Kong-based shipping analyst for Goldman Sachs, who meets regularly with the major Asian container lines. I put a few questions to him. Here they are and his responses:

--  What year do you see global supply and demand coming back into balance?
By mid-2010, we think supply/demand return to balance, as excess capacity is removed from the market. However, we think it would take 3-5 years for the market to fully absorb the new supply coming to market, depending on the magnitude of scrapping and cancellations.

-- Do you expect bankruptcies among non-regional, i.e. more global, carriers?
We assume that all of the Asian listed shipping companies we cover to remain going concerns, provided that banks continue to provide credit. We cannot comment on the other major privately held operators due to lack of disclosure.

-- Have you seen any evidence that recently announce rate increases in the East-West trade lanes are holding?
Asia/Europe rates are stabilizing. There was a rebound in 2Q that was given back. Initial data suggests that 3Q may rebound. Transpacific rates are still declining, as we have been expecting.

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