During Trade Sanctions against South Africa up to 1990
Because trade sanctions against South Africa during the apartheid times had taken effect less cargo was available and fewer ships were needed. Lower freight and charter rates were being experienced. At the start of the container era, the South Africa-Europe Container Service used 9 large containerships and four large ro-ro ships. By 1988, the fleet had been reduced to four containerships and the ro-ro ships had been withdrawn, partly because their countries of registry (France and Sweden) had stopped official trade ties with South Africa and partly because the cargo volume had declined.
Once President FW de Klerk announced the abolition of apartheid in 1990 and once Nelson Mandela had been released from prison, sanctions were withdrawn, and trade began to boom. This saw the introduction of several additional ships and the entry of new companies to the South African trade. Because more cargo became available for shipment, freight and charter rates increased.
During Asian Economic Crisis (about 1997)
Most Asian countries experienced an economic slow-down in the late 1990s. This meant that, to get foreign exchange, countries such as Korea continued exporting machinery, vehicles, consumer goods, electronic equipment and textiles, but there was little money available among consumers to buy imported goods. Exports from Asia continued to provide good cargoes for containerships on the Asia-Europe services, but imports from Europe declined. This meant that ships sailing from Asia to Europe had reasonable cargo volumes aboard, but returned to Asia with little cargo. The imbalance of trade caused financial difficulties for several companies.
The “Flattening” of the Chinese Economy (about 2008 to 2015)
The urbanisation rate in China slowed, resulting in a reduction in the development of housing and infrastructure. This reduced the demand for steel, cement, iron ore, coal and other minerals. There was a lower demand for cargo space on ships, and a lower demand for ships. This lowered the freight and charter rates to the extent that some ships became uneconomical to operate. Some were laid up; older or uneconomical vessels were scrapped and others were placed on “slow steaming”. (This is where ships are ordered to steam more slowly than usual. This reduces their fuel consumption, and reduces the cost of a voyage. The other advantage of slow steaming is that a voyage takes longer, and therefore more ships are needed to maintain the usual sailing schedule.)
Surplus of Ships
This occurs either through a reduction in available cargoes, or when too many ships come into service on a particular trade. This happened when many large containerships came onto the Europe-Asia service at a time when cargo volumes had dropped. Within a few years, the large ships with their large container capacity had added so much container space on the Asia-Europe trade that there was spare space and that resulted in a drop in the freight rates for containers.
Lower freight and charter rates gave shipowners lower profits (or even losses), and some ships were laid up, some were scrapped and some were placed on slow steaming.
A similar problem has affected bulk carriers. Because very large ore carriers came into service from 2014, some of the Capesize fleet operating on the ore trades were left without regular cargoes. This meant there was a surplus of these ships, resulting in a decline in freight and charter rates.
“Credit Crunch” of 2008 to 2013
For various reasons, some major banks in North America (and later in Britain and Europe) got into difficulties because of complex reasons relating to credit that they had given. It meant that they had less money available for lending. This meant that the banks had to limit their lending, and there was less money available for their customers to spend, particularly on luxury items such as cars, electronic goods, and textiles. Because there was lower demand for such items, countries imported fewer of these items, many of which came from Asian industrial countries for the shops of Europe and North America. Therefore, there was less demand for cargo space on ships, particularly on containerships, and a downturn in container shipping was the result.
Because there was a lower demand for cargo space on ships, freight rates declined to the point that owners felt that they could not operate as many ships as when times were good. Therefore, some ships were laid up, others were scrapped, and some were put onto “slow steaming” when they would use less fuel, and therefore were cheaper to operate, although they would take longer to reach their destinations. It also meant that more ships were needed to maintain the schedules of containership lines.
Some Capesizes were chartered at cost whereas only a few months previously, they were on charter at rates of around $200000 per day.
Some older vessels or those that were proving too expensive to operate in such depressed times were scrapped.