Insight: From binge to hangover, shipping firms bleed

Thu Mar 1, 2012 8:55am EST
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By John Acher and Balazs Koranyi

AARHUS, Denmark/OSLO (Reuters) - Many of the giant cranes that tower over the port of Aarhus, Denmark's second-biggest city, are standing idle these days.

They can load a million containers a year, but they are now operating at half capacity as Europe's economic meltdown erodes demand for items such as electronics, dragging a struggling global shipping industry deeper into the abyss.

"People buy less of the unnecessary stuff; they are now satisfied with one television set instead of three, and that is typically all the things imported from China that are being reduced," says Johan Uggla, the terminal's managing director and a grandson of 98-year-old shipping magnate Maersk Mc-Kinney Moller.

Shipping firms, banking on rapid trade growth, went on a binge, ordering new vessels in 2007 and 2008, many of which are being delivered this year. They face severe overcapacity just as demand, particularly on the once lucrative routes between Europe and Asia, falls through the floor.

So what is in store for 2012?

"In one word: bloodletting," says private equity investor Andreas Beroutsos, a founder of One Point Capital Management.

"Some bankruptcies, shrinking, consolidation, very limited new orders, cancellation of large parts of the order book and cyclically elevated scrapping," he added.

Soaring fuel costs, Europe's crisis and the lack of bank financing are likely to worsen a four-year-long shipping crisis and extend it well into 2013.   Continued...