Pick a number: 10%/4%




We’re on the ocean-going side of the world with these numbers, the 10% is the estimated growth in world shipping capacity due to come on line this year, the 4% is the anticipated growth in demand.

These at least are the numbers provided by Maersk, the Danish shipping group, in their conference call last week. As Maersk is the world’s largest provider of shipping in the world, we have confidence that their finger is firmly on the pulse of world trade.

The last two years have been rough, very rough, on trade, with goods movement declining 11% per the WTO and 12% per the World Bank; either of those numbers is a bit blood-curdling, and indeed, represents a speed of decline in trade that exceeds that of the Great Depression.

At the same time as the world’s economies and their mutual trade seized up like an engine drained of oil, mega-ships were happily splashing down from the shipyards, fulfilling orders placed years before when the future looked bright as could be. A certain number of these ships are designed to take advantage of the opening of the enlarged Panama Canal in 2014, others were commissioned in order to gain market share.

That 4% growth would be over this most recent year, as mentioned, a very bad year, so even that growth will be unimpressive.

International and home country banks are heavily involved in the business – ships are very expensive – and they have approximately $90 billion in potential writedowns to absorb because of the devaluation of many shipping company’s net worth and the value of their assets. This will put some of the lines in default of key banking agreements, leaving it up to the banks to decide whether or not to extend their exposure.

There thus may be some capacity reduction by way of industry reorganization going on through 2010 – 14% of capacity is now simply lying idle – which, presuming that world trade gets up off the mat, might make for a rosier 2011. – lsm

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