Shipping rates, which already fell 59 percent from this years high, are retreating as the Organization for Economic Cooperation and Development predicts a 16 percent drop in world trade for all of 2009. Chinas State Council called for curbs on steel and cement production last week. A record 146 capesizes will be added this year, equal to 28 percent of the fleet, according to Fearnley Consultants A/S.

“The pressure of the new ships will be overwhelming,” said Andreas Vergottis, the Hong Kong-based research director at Tufton Oceanic Ltd., which manages the worlds largest shipping hedge fund, with $1 billion of assets. “It will take a lot of time and a lot of pain before shipping recovers.”

The biggest-ever order book for new carriers, according to Lloyds Register-Fairplay, may hurt profits at shipping lines while providing higher returns for traders. Rates for capesizes have fluctuated more than 50 percent in seven of the past eight years.

Bulk Shipping Fleets

Mitsui O.S.K. Lines Ltd. and Nippon Yusen K.K., both based in Tokyo, and China Cosco Holdings Co. operate the worlds biggest bulk-shipping fleets, Mitsui says.

Nippon Yusen forecast its first full-year loss in 23 years last month, citing lower demand for container shipping, and expects capesize rates to average $55,000 in the six months through March 31. Mitsui cut its full-year profit estimate by 25 percent last month. China Cosco said on Aug. 27 its commodity ships lost money in the first half.

Estimates in the survey ranged from $10,000 to $25,000. Sverre Bjorn Svenning, the analyst at Fearnley Consultants who correctly predicted last years collapse in the Baltic Dry Index, which fell 92 percent, was at the lower end.

The drop in capesizes is consistent with the Baltic Dry Index, a gauge of the cost of carrying dry bulk commodities such as iron ore, coal and grain. The index, which includes four types of vessels including capesizes, more than tripled this year. The index is 44 percent off its high for the year.

Operating Costs

“Weve seen several yards that have delivered their first ships, albeit delayed, and we expect them to increase the pace of deliveries in the second half,” said Svenning, who is based in Oslo. “We will see more next year than we see this year.”

A rebound in trade may also limit the tumble. The Paris- based OECD said Aug. 19 that the economies of its 30 members collectively stopped shrinking in the second quarter. Japan, France and Germany emerged from recessions prompted by the collapse of U.S. real estate that froze credit markets and left the worlds biggest financial companies with $1.61 trillion of losses and writedowns.

Economies are showing signs of improving after the Group of 20 industrialized and emerging nations pledged about $12 trillion to combat the first global recession since World War II, according to International Monetary Fund data.

U.S. Economy

The U.S. economy shrank less than economists anticipated in the second quarter and German business confidence exceeded their expectations in August. The median of 56 analysts surveyed by Bloomberg shows America will expand this quarter and the euro zone will grow in the first three months of next year.

World trade rose 2.5 percent in June, the biggest advance in almost a year, the Netherlands Bureau for Economic Policy Analysis said Aug. 26. Ships carry about 90 percent of world trade, The Round Table of International Shipping Associations estimates.

Rates for capesizes jumped to a record $234,000 a day in June last year as demand for commodities congested ports. In Newcastle, Australia, the worlds biggest coal export harbor, as many as 43 ships waited to load that month, Newcastle Port Corp. data show. Lined up end to end, that many capesizes would stretch more than 7 miles.

Credit Markets

Source

The move is intended to ensure the shipping industry does its part to improve the air quality of major seaport communities. Ships moving through the zone would be subject to the tougher emissions standards.

“This is an important and long overdue step to protect the air and water along our shores,” Jackson said, speaking in front of a row of cranes at a press conference in Port Newark.

Jackson estimated that 40 of the 100 largest U.S. ports are located in metropolitan areas that fail to meet federal air quality standards. One of them is the Port Newark facility, which is part of the Port of New York and New Jersey - the East Coasts largest port complex.

The EPA estimates that 90 percent of the ships carrying cargo in and out of U.S. coastal ports are based in other countries.

Ships operating in the proposed zone would face stricter limits on the sulfur content of their fuel beginning in 2015, and new ships would be required to incorporate advanced emission-control technologies beginning in 2016, Jackson said. Sulfur content is directly related to the soot, or pollution, emitted after fuel is burned.

Jackson made the announcement at a news conference with the Coast Guard and other federal and state officials.

EPA estimates the new emission-control technology will cost shipping companies $3.2 billion. Jackson said that translates into an increased cost of about 3 cents for each pair of sneakers shipped into the United States.

Gov. Jon Corzine welcomed the proposal and recalled sending Jackson to Washington, D.C., to lobby for it when she headed New Jerseys Department of Environmental Protection.

Christopher Koch, president of the World Shipping Council, said international shipping companies have participated in discussions about the proposed emissions control area and are not opposed to tighter standards. The Washington, D.C.-based trade organization represents international container ship operators.

“We all recognize that vessel emissions regulations have to be updated,” Koch said.

The EPA is under a federal court order to issue regulations to reduce emissions from oceangoing ships by December.

The IMO, a United Nations agency with 168 member countries, will begin reviewing Jacksons proposal in July. She said approval could occur as soon as next year.

“Dirty diesel pollution from ships is a serious, but solvable problem,” said Rich Kassel of the New York City-based Natural Resources Defense Council. “Cleaner ships will mean cleaner air.”

Mexicos absence from the proposal raises the possibility of shipping companies routing U.S. cargo to Mexican ports with lower emissions standards, if the proposal is approved. Talks with the Mexican government are under way, Jackson said.

“We would like to partner with Mexico as well,” Jackson said.

Mondays announcement comes at a time of slowing international trade, which has undermined activity in many U.S. ports. A measure of shipping containers being exported from the Port of New York and New Jersey plunged 25 percent in December from the same month a year earlier, while imports dropped 11 percent.

Source

DHL has tried to be a major player in the U.S. since it bought Airborne Inc.s ground delivery network for $1.05 billion in 2003, but it has lagged in the air and ground markets combined, analysts said.

Now, as other shippers pick up some of DHLs business in the U.S., it could cost customers more but boost the bottom lines of the shippers.

“The real upside might be two, three or four years down the road, when the economy is feeling better and FedEx and UPS are able to raise prices, because they wont have another competitor nipping at their heels,” said Avondale Partners analyst Donald Broughton.

Mondays news follows Deutsche Posts announcement in May that it was working on a deal with UPS to allow the Atlanta-based company to carry some of DHLs air packages.

The DHL-UPS venture was expected to last up to 10 years and generate up to $1 billion in annual revenue for UPS, the worlds largest shipping carrier.

UPS has said the contract with DHL, which it has been working to complete, would mostly involve the transport of DHL packages between airports in North America - not the pickup or delivery of DHL packages to customers.

UPS spokesman Norman Black said his company would continue to work on an air-haul vendor contract with DHL. But, he added, “Todays announcement by DHL certainly could affect the size and scope of that contract. Well go back into talks and see what develops.”

Black cited the part of the Deutsche Post announcement that said DHL plans to stop offering air service between U.S. cities.

“The only thing thats left is moving international packages once they get to the U.S. border,” Black said. “Thats a dramatically lower amount of volume than what they were originally talking to us about.”

Currently, DHLs total air volume for shipments from points between U.S. and international destinations and between points within the U.S. is about 1.2 million shipments a day.

Avondales Broughton said he thought the value of the proposed deal between DHL and UPS had been dwindling even before Mondays news.

“This just accelerates that process,” he said.

Edward Jones analyst Dan Ortwerth said Deutsche Posts decision changes the scope of a potential DHL-UPS deal, but doesnt necessarily kill it.

“I dont see any motivation for UPS to outright walk away,” Ortwerth said. “UPS is in the stronger position, and Im sure at the bargaining table they will protect their own interests plenty well.”

DHLs air and ground operations generated $3.4 billion in revenue last year.

Source: ncber

`Traffic will drop at least 10 percent for the full year,” Zhang Denghui, assistant president of China Shipping (Group) Co., parent of China Shipping Lines, the country’s second-largest container line, said in an interview yesterday. “An even much larger drop is possible, as the full impact of the global economic turmoil is yet to come.”

Overseas sales of China-made toys and other products are falling as the U.S. slips into recession and other economies slow down. The yuan’s 6.9 percent gain against the dollar this year has also forced some domestic manufacturers to stop production for export, reducing orders for containerized traffic.

“A drop in container traffic is unavoidable as the economy slides,” said Roslyn Ji, an analyst at Core Pacific-Yamaichi International Ltd. “There’s no way for the shipping lines to bypass this slump, both in traffic and share prices.”

China Shipping Container Lines fell 2.9 percent to HK$1.02 in Hong Kong trading today. The shares have dropped 78 percent this year.

Break Even

China Shipping’s container business is about breaking even as some profitable routes make up for losses on others, Zhang said. Overseas routes account for more than 70 percent of the company’s container capacity.

Orders have dropped on North American and European routes in the past two months starting August, Zhang said. Traffic on lines from China to Australia and South America remains stable, he said.

“It isn’t practical to cut services even when orders fall, as we can’t afford to lose clients,” said Zhang. “It’s a big challenge for our credit lines in this capital-intensive industry.”

China Shipping and China Ocean Shipping Group Co. handle a combined 16 percent of China’s containerized exports.

The rates for moving commodities like coal may also fall next year, according to Zhao Yingtao, general manager of China Shipping’s Transportation Division. The company will start negotiations next month with commodity producers to set annual fixed rates. Shipping rates for coal transport increased by 40 percent this year from 2007, according to Ji.

Source: Bloomberg