Recent declines in global overseas trade have nearly capsized the shipping industry. Leading exporters are feeling the tide as most have reported bankruptcy, and some have abandoned ship.
It seems to be the perfect storm – a surplus amount of ships from a previously prosperous time, coupled with trading countries that are now demanding less exports. Global exporters are left at a stand-still and global overseas trade has plummeted due to increases in domestic self-sufficiency.
The Baltic Dry index is a numerical representation of the current situation. The index measures the price shippers charge to export raw materials. Once thriving above 11,000 in 2008, the Baltic Dry Index was at under 300 this past February and has remained to under 1,000 ever since.
Hanjin, one of the largest global overseas trade companies in the world, recently filed for bankruptcy in both the US and its mother country South Korea.
There now exists a heavy surplus of ships that are not benefitting the economy. Ship owners have no use for their vessels and no space to store them, which is making the situation increasingly alarming. Hopefully, the price of scrap metals rises in the near future, these old ships will bring prosperity to their owners.
Head of supply chain at and VP of SSA & Co., Regenia Sanders believes that if more shipping companies gave themselves a competitive edge through technological advancements, there may be a way to improve the industry through amplifying efficiency, leading to partnerships, as well as creating “room for container exchanges so not as many containers are idle at one time.”
As the world is changing around us, leading world industries must follow and adapt to the new global conditions, or risk getting left in the riptide.
Emily Harris
Economics Intern from University of South Florida St. Petersburg at Binger Financial Services, LLC | bingerfinancial.com