For the last five years, top shipping companies pushed forward with fat investments in more and bigger vessels, even as signs of trouble piled up.
The goal was to shore up profits by doing business on a larger scale as global trade bounced back after the recession. But the new business never came. Freight rates dropped and shippers’ revenues plunged.
Today, the supply of ships and their capacity is completely out of whack with demand. China's economy has slowed and consumer goods flooding the U.S. have saturated the market to the point where there's no more room for growth, analysts say.
And the industry is no longer under the delusion that it can grow its way out of trouble. That became clear with the August 31 bankruptcy of South Korea’s Hanjin Shipping Co., the world’s seventh largest shipper, which temporarily marooned $14 billion of goods as ships were denied access to ports from Shanghai to Los Angeles.
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