stratfor | The global shipping industry is oversupplied.
Because supply far exceeds demand, shipping rates have plummeted, as
have the prices of ships. Some shipping companies have sought to
capitalize on this trend by purchasing newer, larger ships at lower
prices so that they can remain price competitive. But unless demand
rebounds by the time these ships become operational, the industry's
oversupply problem will only worsen.
It is unclear whether the global shipping industry will normalize
before these new ships enter the market. Demand could rise as the global
economy recovers, or the supply of ships could somehow fall. But the
economy's recovery could just as well be slower than anticipated.
Several factors could prevent the industry from righting itself, not the
least of which are inaccurate forecasts of future market behavior. In
fact, the current state of global shipping was caused in part by
incorrect predictions of continued growth prior to the 2008 financial
crisis. In any case, continued poor performance and a sluggish global
economy could eventually force the shipping industry to restructure.
