Surplus of shipping expected to rise

Press, 5 December 1985, Page 55

Surplus of shipping expected to rise

By

OLIVER RIDDELL

in Wellington

A world oversupply of shipping will be evident next year in all sectors, except specialist areas, the Shipping Corporation has forecast in its annual report to Parliament.

The corporation’s chairman, Mr Michael Hirschfeld, said the corporation could expect a marginal result for the year. This would be achieved providing prevailing conditions in trades and services in which the corporation was involved did not change significantly, and the New Zealand dollar was not subject to sudden and substantial changes against the currencies of the main trading partners. Oversupply had existed for some time for dry and liquid bulk shipping and in the charter markets, he said. It was now becoming equally pronounced in liner shipping with so much new construction. The was particularly great from

the entry of very large container vessels into round-world services. The oversupply of container ships space was expected to reach more than 50 per cent next year. This excess tonnage would maintain sharp competition and impel freight rates down even further.

This had already rocked the foundations of some big ship owners, particularly in Asia, Mr Hirschfeld said. The huge supply of ships of all types available on the second-hand market at very low prices was lowering the real value of shipping fleets and this would continue to cause insolvency problems for some owners, as well as problems for their bankers and financiers. The abundance of container shipping second-hand would probably attract more opportunist operators into liner shipping to attack the established trades. This would keep prices low, but increased the risk of destabilising the liner trade.'

Problems of overcapacity would not be likely to diminish significantly in the short to medium-term. Although shipping was a cyclical industry, and undercapacity and its accompanying high freight rates would return, only soundly based, efficient and adaptable companies would survive in the present climate. The floating New Zealand dollar and its volatility against other currencies was a problem, Mr Hirschfeld said. The corporation was heavily exposed to exchange rate variation through its forced dependence on overseas borrowThe exchange rate also had an impact on revenue earned and costs incurred offshore and the accounting of such transactions. The corporation would continue to give close attention to currency management, and take prudent measures to guard as best as possible potential adverse ’currency movements.