Logistics Industry is Drowning in Capacity.

Friday, April 10, 2009 20:43
Posted in category China Logistics

In predicting the return of the manufacturing economy, and thus the wider economy, there is few indicators more important to me than logistics activity. Simply put, we need logistics to move everything from raw materials, sub assembled parts, to finished goods.

It is a cycle that allows for the complete extract ,package, sell, and scrap cycle to take place, and the amount of activity within the logistics sector can speak volumes about the wider economy.

  • Want to know if factories are turning back on, look at bulk shipping along the Yangtze.
  • Want to know if sub assembled parts are making their way from One area of China to another, look at trucking.
  • Want to know if the US/ EU has worked its way through its stock, and is placing orders, look at containers

An oversimplification of the grossest order, however for me, it is still better than the PMI, and the recent BBC piece

World trade fall hits Hong Kong shipping offers a glimpse into just how poorly the logistics sector is performing:

As the China boom deflates, demand for steel, iron ore and other bulk items from around the world diminishes, leaving bulk carrying ships all dressed up with nowhere to go.

Hong Kong has about 70 ships in “hot lay-up” at the moment, meaning they are waiting with full crews. Singapore has several hundred ships in “cold lay-up”, where the ships are without crew.

It is a problem that recently resulted in a large amount of layoffs at two global logistics firms (announcements still not made), and when speaking with friends in Shanghai and HK about what their clients are telling them, the news is not good. Orders have yet to return, firms are not booking containers, and many are now looking to 2010 for any credible and sustained bounce back will come to their industry.

– Photo provided by Graham Thompson

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One Response to “Logistics Industry is Drowning in Capacity.”

  1. Alex says:

    April 12th, 2009 at 3:59 am

    Maybe worth mentioning Maersk currently resting most of their ships while renting, and running heavily (wearing out) rented capacity from ship owners that cannot afford to rest their own ships.