Group of Ship-Owners Appeals for Concerted Action to Reduce Capacity in Market

Group of Ship-Owners Appeals to Reduce Capacity in Market

In view of the ongoing disastrous situation in the shipping business and also due to missing impulses for action from the recent 8th Maritime Conference in Kiel, a small group of ship-owners from Leer, Germany, appeals for a concerted action to reduce capacity in the market.

A jointly executed strategy to shorten shipping capacity should help to increase rates to adequate levels again, so is the hope. It is for this reason that the ship-owners inspire to follow their example to temporarily lay up shares of the general cargo fleet, especially in the field of European coastal shipping.

Both ‘Briese Schifffahrt’ and ‘Fehn Ship Management’ from Leer, Germany have been laying up some vessels in the past. “In fact, rate levels are at such low levels that some vessels are even paying money to transport cargo”, says Manfred Mueller, managing director of Fehn Ship Management.

This is economical nonsense. That’s why we decided to lay up some vessels. This decision by itself is already better than to keep the ships running.”

The rates have been decreasing since 2008”, says Manfred Mueller. The misery can be clearly seen in the development of the Baltic Dry Index, which consolidates prices for the carriage of the most important basic materials on more than 20 main shipping routes. The index collapsed from its alltime high of 11,793 points in 2008 to 860 points today.

Ship-owner Roelf Briese and managing director of Briese Schifffahrt made a first attempt for such a joint action already two years ago; however, this did not evoke much resonance back then. This time he hopes there will be more interest in the industry. Convinced he states: “If enough ship-owners participate and take out sufficient volume from the market, prices will climb and ships will be able to earn adequate rates again.”

He expects that a lay-up-share of 20 percent may lead to a rate increase of about 30 percent. He also claims: “The cost for laying up a vessel is easily covered by the increasing rates.” Moreover, Mr. Briese sees another side effect: when ships are taken out of the market the crewing market eases as ship-owners currently encounter a shortage of qualified crew.

As an example for the effectiveness of such a concerted action Mr. Briese hints at the shrimpers along the German North Sea coast. They did not go fishing anymore when shrimp prices collapsed in 2011 to only 2.30 € per kilogram and threatened their existence. After this period, and by shortening supply, prices climbed up again to adequate 3.20 € per kilogram. “Today the shrimpers work only three to four days a week. I.e. they work 30 percent less and earn more money“, says Mr. Briese.

The fishers may not have a degree in economics, but by intuition they did the right thing.”

[mappress]
Fehnship, April 17, 2013