Ocean Shipping in The Period of Recession/credit Crisis

            The global shipping industry constitutes of transportation of both goods and passengers with international freight transport being the largest segment occupying 69.1% of industry revenue. The recent credit crisis has left tragic impact in most parts of the world and has not left a single sector unaffected. The banks collapsed, software firms announcing layoffs, national GDP declining at much faster speed than space shuttle would come down after performing its operations in the space Shipping industry was also not left unaffected during the credit crisis as shipping companies around the world were gearing up for gloomy days as freight rates had collapsed as movement of goods across oceans had dwindled following the economic slowdown. Elsayeh and Elkolla stated that world container traffic has tripled in volume in the last two decades growing at an average of about 8% that resulted in  liner shipping investing billions in horizontal and vertical integration in order to increase their market share as well as get advantage of the economy of scale. It is further stated that the recent financial crisis in 2008 and its rapid conversion to economical crisis have deeply affected all economies worldwide and deterioration in almost all worlds’ growth rates and volumes of exports and imports was having a significant impact on container transportation. Further the collapse of credit based demand growth, credit supply and financial asset prices pushed the industry into severe recession since Second World War. The crisis fueled up a global economical crisis leading to decline in all economical indicators mainly due the presence of globalization. It is further stated that globalization widened the distance between production and consumption and markets as well as it globalizes the supply chains that previously spurred the growth rate in shipping industry. The impact of global credit crisis on shipping industry could be seen in the decline of growth rate in global container which increased by 12.7% in 2007 and then came down drastically to 7.4% in 2008 with further slowdown to 3.1% in 2009. According to research published by French company Alphaliner, the world’s 24 largest container liner has declined by 4% during the financial crisis. It is further stated that since September 2008, the tonnage decline from 10.86 million TEU to 10.43 million TEU.  According to Lloyd’s Register, the global industry booked 86.4% million gross tons (mgt) in 2009 which was 50% lower than the previous year’s 170 mgt.  The shipbuilding industry outlook for 2009 is uncertain but bleak given the current global economic downturn, credit crunch and stagnant ocean shipping market. The credit crisis had significant impact on economies of most of the nations with downfall of major companies, employees being laid off, etc. the shipping industry was also effected due to the crisis due to the absence of credit facilities.