April 16 - Two of Germany's leading ship owning and ship management companies have urged fellow shipowners to consider a concerted lay-up of ships in order to reduce capacity in the market to obtain a restoration of acceptable rates.
In a statement, Leer-based Briese Schiffahrts GmbH and Fehn Ship Management GmbH say that a jointly executed strategy to 'shorten shipping capacity' should help to increase rates to adequate levels again, and add that they hope other shipowners will be inspired to follow their example to temporarily lay-up a share of the general cargo fleet, especially in the field of European coastal shipping.
Manfred Mueller, managing director of Fehn Ship Management states: "In fact, rate levels are at such low levels that some vessels are even paying money to transport cargo. This is economical nonsense. That's why we decided to lay up some vessels. This decision by itself is already better than to keep the ships running.
"The rates have been decreasing since 2008," adds Mueller, whilst the statement says that the misery can be clearly seen in the development of the Baltic Dry Index, which consolidates prices for the carriage of the most important basic materials on more than 20 main shipping routes. The index collapsed from its all-time high of 11,793 points in 2008 to 860 points today.
The statement adds that Roelf Briese, managing director of Briese Schiffahrt, first attempted such a joint action two years ago; with little success.
This time, the statement says, Briese hopes there will be more interest in the industry. "If enough shipowners participate and take out sufficient volume from the market, prices will climb and ships will be able to earn adequate rates again."
He expects that a lay-up of 20 percent may lead to a rate increase of about 30 percent.
He also claims: "The cost for laying up a vessel is easily covered by the increasing rates." Moreover, Briese sees another side effect: when ships are taken out of the market the crewing market eases as shipowners currently encounter a shortage of qualified crew.
As an example for the effectiveness of such a concerted action Briese gives an example of the shrimp fisherman along the German North Sea coast. They did not go fishing anymore when shrimp prices collapsed in 2011 to only EUR2.30 per kg, which threatened their existence. After this period, and by shortening supply, prices climbed up again to adequate EUR3.20 per kg.
"Today the shrimpers work only three to four days a week; which means they work 30 percent less and earn more money," says Briese. "The fishers (sic) may not have a degree in economics, but by intuition they did the right thing."