Down the Trough

Twelve months ago, a modern, 10,000-ton collier bound for Europe could be counted on to earn $3,570 profit each day at sea. Last week the same coal-laden vessel on the same run was losing up to $280 a day. After steaming along the crest of postwar prosperity, shipping is down in the trough of a deepening recession.

The trouble with shipping is overexpansion coupled with a recession--and the glut of oil (see below). In 1957, tanker operators expanded their fleets by 5,500,000 deadweight tons, or 11%, to 49.6 million tons overall. But free-world oil production--and thus the need for tankers--will increase by 4% or less this year. Result: nearly 3,000,000 tons (6%) of the world's tanker fleet lie idle, and the total may mount to 4,000,000 tons by midsummer.

So far, few big oil companies have canceled plans to build big (70,000 tons and up) supertankers. Most shipyards are still booked solid into 1960. But the rest of the ship market has all but collapsed. Tanker charter rates have been cut more than 90% in one year, and prices for used ships are just as bad. "A year ago," said one ship broker, "it was impossible to buy a T-2 tanker for less than $4,250,000. Now it's impossible to get $1,000,000 for such a vessel."

Operators of dry-cargo tramp steamers are in even tougher shape. With transatlantic shipping rates at a postwar low ($3.10 per ton for coal v. $16 per ton a year ago), many shipowners are going $10,000 to $20,000 in the red on each voyage. And like tankermen, Greek tramp operators are busy laying up vessels, have already mothballed about 20% of their ships. Altogether, the Greeks control a 5,500,000-ton fleet comprising half the world's tramp tonnage.

Shippers know that the stormy seas will eventually calm. The inevitable growth of world trade will demand all their ships--and more. But to stay afloat until then, Greek tramp-ship owners in New York and London last week were anxiously searching for a plan to cut costs and increase revenues. One idea is to set up a series of unbreakable dry-cargo rates to ensure an operating profit on each voyage. Failing in that, the Greeks may be forced to reduce their surplus tramp tonnage by laying up still another 20% of the fleet, assessing each owner with a vessel still in service a fixed fee to help maintain the idle ships.

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