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Shipping

Shipping industry faces rough economic waters

The world's largest cargo ship, the "Alexander von Humboldt," was christened in Hamburg. But crisis continues to grip the shipping industry, and many German companies could go under before the situation improves.

The brand new "Alexander von Humboldt" has been a tourist attraction in Hamburg harbor for days: The almost 400-meter-long (1,312-foot-long) giant belongs to the French shipping company CMA CGM and can hold close to 16,000 containers. It was christened in the northern German city on Thursday (30.05. 2013).

Together with its sister ship "Marco Polo," the "Alexander von Humboldt" shares honors as the world's largest cargo ship. Looking at the skyscraper-sized ship up-close, it's hard to believe that the German sea freight industry is still facing a crisis.

But because the hard times began five years ago, after the banking- and economic crisis, Ralf Nagel of the Association of German Ship Owners (VDR) said the industry is, in fact, stuck in "an extraordinarily deep crisis." Back then, there were suddenly significantly fewer goods to be transported and way too many ships.

Caught by surprise

Ralf Nagel
Photo: Angelika Warmuth dpa/lno

Nagel: "Shipping industry is in extraordinary crisis"

No one expected the crisis, he added. "Everyone was doing better and better, then suddenly the current was cut off. Right now it's no fun running a shipping company," Nagel said.

The sector still hasn't recovered from the nose-dive that accompanied the crisis and while there are some areas that are profitable, the whole business is still facing rough seas, according to Nagel.

"Here and there you can see a light at the end of the tunnel, but it definitely won't be over tomorrow," said Alexander Tebbe of the Auerbach Schifffahrt shipping company in Hamburg.

The problem of long-term planning

There are several reasons the crisis won't be over quickly for shipping companies. Counter-measures do not take hold as quickly as in other industries and when companies order a new ship they have to look three or four years into the future, as that's when it will be delivered. But if orders fall, buyers can be stuck having to pay millions of euros for a ship they can no longer afford.

That's exactly what happened over the last years, Tebbe said.

"People had too much cheap money and ordered so many ships that, looking back today, it partly destroyed the market," he added.

While large commercial companies have hardly been hit by the shipping decline, many smaller charter companies have suffered more. In recent years, more than 100 German shipping companies have filed for bankruptcy and hundreds more could follow.

#51878504 -
Hamburg, Containerhafen 3
© Tran-Photography -

After the crisis, there was less cargo to go around

The commercial shipping companies run along the big harbors of the world like bus stops, reliably and regularly. They have their own large cargo ships, but not as many as they need for their goods. That's why they fall back on the charter companies, which rent out their ships.

"If the large commercial companies aren't doing well, they of course pass the pressure on to the smaller companies they rent from," Nagel told DW, adding that it is not clear who will survive the competition.

Small charter companies are threatened by bankruptcy, and the two large German commercial companies, Hapag Lloyd and Hamburg Süd, have been openly considering consolidation for economical and competitive reasons for months.

Pirates, fuel and banks

Other factors have also contributed to the shipping companies' woes: high prices for fuel, certain routes that require extra payments for protection from pirate, as well as banks that have become wary of handing out credit as freely as before the economic crisis.

Germany's Commerzbank even announced that it would leave the shipping business. Nagel said this posed two problems to shipping companies, "Our companies are under enormous pressure from the market, and at the same time have difficulties keeping their financial partners on-board."

He said he expects the crisis to last until 2015. Until then, companies are playing for time. In Germany alone, hundreds of thousands of jobs depend on it, according to Nagel.

First signs of hope

Politicians realized this as well, at least to a certain extent. Taxing the charter shipping companies for additional millions of euros looked like a done deal. But the companies were able to win a delay in the added tax, convincing lawmakers to suspend the levy for now. It will probably only come into effect in 2016. But other measures of help have been rejected by politicians, according to Nagel.

Auf dem Bild:
In der Werft der Auerbach Schifffahrt GmbH & Co. KG.
Rechte: Auerbach Schifffahrt GmbH & Co. KG

The shipping industry will prevail, Alexander Tebbe confidently stated

He said, however, that there was another indicator of improvement: the number of ships that are scrapped is currently rising: "And the age of these ships is going down as well. The average age of a scrapped ship is now 22 years, whereas two years ago, it was roughly 30." Nagel said selling the steel that the ships were made of is often more profitable than keeping them, and that fewer ships at sea means more work for the remaining fleets.

Remaining optimistic

Alexander Tebbe from Auerbach Schifffahrt in Hamburg also said he remains hopeful. He founded his company in 2010, right in the middle of the crisis, and specializes in transporting goods that are too large for the containers on cargo ships, like tree trunks, large steel plates or windmill parts. In Germany, the country with the most freighters, this can be hard to find.

Together with his business partner, Tebbe owns three used ships and takes care of the freight himself. Despite the crisis, he said he wants to continue buying ships, and approaches the situation with a healthy dose of optimism.

"Our motto is: shipping will prevail," he said. "There will be people and there will be trade. And unless the oceans dry up, this will still be the case the day after tomorrow."

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