Host of problems confront liner industry

Smooth sailing it ain't these days for liner carriers.

Cuts in earning forecasts, dropping rates, canceled ship orders, worries of overcapacity, weak charter markets. The credit crunch has hit liner shipping in a big way. Last week, the Howe Robinson Containership Index, a barometer of the containership charter market, plunged. According to Containerisation International, a CV 1100 class vessel could be had for $8,000 per day, down from $13,000 a day six month ago. 

Meanwhile, Maersk Line chief Eiving Kolding said the industry should be braced for mergers in the coming years as rate pressures would drive some carriers to the brink, Lloyd's List reported. Speaking at a German logistics forum, Kolding said he expected rates to bounce back, but possibly not in enough time to save every carrier.

The shipping lines are actually subsidizing each of these containers moving from Asia to Europe on spot rates of $1,000, he said. If we see that picture continuing for another six to 12 months, my estimate will be that not all liner shipping companies will be able to sustain that. China Shipping then announced this week it lost nearly $40 million in the third quarter of 2008. While it made $93 million in the first half of the year, poor conditions in the second half may wipe out those results. And analysts are predicting that China's second-biggest carrier will lose money in 2009 due to depressed demand, ship orders and high operating costs.

Last but not least is how carrier regulation in Europe will shape up over the next five to 10 years. Two weeks into the post-conference world, now steamship lines (and even shippers) are worried that EU regulators may curb alliances in European trades that exceed a 30 percent market share threshold -- the idea being that some alliances might operate as de facto monopolies. The issue was broached at maritime law and shipper forums in Copenhagen and Oslo this week, Lloyd's List reported, with both sides worried that the operational and service efficiencies carrier alliances create could be wiped away by overzealous regulators.