During the consumer credit bubble, global shipping capacity was ramped up to carry the volume. Now that the bubble has burst, the sector finds itself awash in vehicles vying to carry still shrinking volume. This is deflationary, and is positive for consumers in the sense that this overbuilt infrastructure will help to suppress consumer prices over the next few years. It is not so good for transportation companies as many over-levered themselves to buy new vessels and are now struggling to keep cash flow positive on lower revenues. As always, those that manage with the most financial discipline will survive and garner a larger market share after consolidation in the industry serves to clean out those with weaker balance sheets.
This clip offers a good discussion on the topic. Tim Ross, Head of Asia Pacific Transport Research, Credit Suisse expects a bleak outlook ahead for the sector. He warns freight supply will rise, which will impact Asia-Europe routes. Here is a direct link.
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