California Apparel News

It will be years before U.S. consumers are snapping up as many flat-screen TVs, laptop computers and frilly dresses as they were in 2007.

With most of the world in a recession, trade will recover so slowly that economists feel it will be another six years before the shipping industry is back on its feet.

Experts predict a 5.8 percent drop in world container traffic in 2009.

“To get back to where we were two years ago [in trade] will take us until 2015,” said economist Paul Bingham, who tracks trade, port traffic and the shipping industry for IHS Global Insight, an economic intelligence agency based in Lexington, Mass. “The recovery [in trade] is several years out.”

Bingham said he sees the global gross domestic product shrinking 2 percent this year, with mild GDP growth of 1.8 percent. A broader rebound of 4 percent growth will occur in 2011, he said.

Bingham was speaking in an April 28 Webshy;cast, organized by IHS Global Insight and Lloyd’s Register-Fairplay Research, on the future of the shipping industry, which has been hard hit by the economic downturn.

At a recent annual general meeting in Copenhagen, A.P. Moller-Maersk Chairman of the Board Michael Pram Rasmussen told the group that the container-shipping markets in early 2009 had experienced unprecedented drops in transported volumes. This, combined with the addition of new vessel tonnage, led to a significant decrease in rates, which are now “at an untenable level,” according to Rasmussen. A.P. Moller-Maersk is the parent company of Maersk Line, the largest container-shipping company in the world. Consumer crash

Several factors will make it harder for U.S. consumers to rev up the rapid spending pace that seemed to have no limits a few years ago.

Credit is becoming much tighter. Banks are wary about giving loans and tightening terms for credit. The days of refinancing your house to have some extra cash on hand are just about over.

But currency-exchange rates might prod more cargo traffic coming from the United States. Economists are predicting that by the end of the year, the U.S. dollar will start losing its value compared with other major currencies around the world. That means imports will cost more, but U.S. exports will be cheaper. Consumers may buy more cautiously, but U.S. products will look cheaper to buyers in Europe and China.

“The long-term trend in the U.S. dollar has been seen to be declining since the beginning of the decade. It was interrupted last fall, but we don’t believe that is sustainable,” Bingham said. “The dollar will resume its long-term decline by the end of the year.”

One note of optimism is that economists don’t foresee a global trade war taking place like the one that occurred during the Great Depression of the 1930s. Economists believe global protectionism intensified the Depression. During that time, the Smoot-Hawley Act was enacted, jacking up tariffs in the United States, which stifled international economic cooperation.

“The globalization of world markets has not reversed in this recession,” Bingham said.Glut of ships

The shipping industry has been battening down the hatches to weather an oversupply of ships and a drop-off in international trade. The industry is weighing how to reduce the number of bulk carriers and container ships that are coming out of shipbuilding yards at a rapid rate. Already, shipping rates between China and the United States have plummeted to $1,500 to $2,000 per 40-foot container, nearly a 50 percent drop from just a few years ago.

The supply of container ships grew 13 percent a year between 2004 and 2008, keeping up with trade between China and its customers in the United States and Europe.

Niklas Bengtsson of Lloyd’s said the world’s container-ship fleet has the capacity to carry 12.4 million 20-foot containers and a huge number of container ships are on order, with the capacity to carry another 5.8 million containers. Some of those orders could be canceled, but the older the order, the more difficult it is to break.

“The forecast is that the fleet will grow more than 9 percent annually on average between 2009 and 2013,” he said.

Ship owners are worried about how they are going to absorb all this capacity. “This is troublesome in the current situation,” said Christopher Paring;lsson, manager and senior consultant at Lloyd’s.

When fleets built up rapidly in the 1970s, ship owners often scrapped their vessels early. Paring;lsson remembers that in 1979, an oil tanker called Chicago was built for $30 million. Four years later, its owner sold the tanker for $4.8 million for scrap.

Today, like in the 1970s, the fleet of tankers, container ships and bulk carriers is fairly new. “No one wants to go back to the day when fairly new ships were scrapped,” said Chris Holling, executive managing director of business planning solutions with IHS Global Insight.

Shipping companies have been advising their ships to sail more slowly so they stay at sea longer. This is a practice called “slow steaming.”

They are also changing routes to maximize profits in new underserved markets.

With piracy on the high seas a major problem around Africa, some shipping companies are avoiding the area so their crews and cargo are safe.