Afternoon:
10°c
Back in early June, following the BIMCO shipping industry conference in Athens, this column warned of the looming disaster in shipping. Yesterday came news that one of the largest container operators, the German firm Hapag-Lloyd, is desperately seeking £250 million of new capital to stave off disaster. It is not the first. It is unlikely to be the last.
Of all the industries in the world facing problems of over-capacity in the face of declining demand, none is in worse shape than shipping. The motor industry may be on its knees, the airlines flying half empty and the leisure industry wondering where the next customer is coming from, but shipping has an over-capacity problem worse than anything in the last 50 years.
It has only itself to blame — unless you include the bankers who indulged the owners in their orgy of speculation and wishful thinking. In that brief period of ultra-low interest rates and rocketing world trade which seems from another age but was only two years ago, freight rates went through the roof. This sparked off a collective loss of reason in the industry which led to a rush of new ordering, the like of which the world has never seen. Whereas before the decision to order a ship was a laboriously thought through process with owners all too aware of their vulnerability — the cyclical nature of the industry and scarcity of finance — this time the new entrants thought it would be different. Shipping to them was just another asset class, a bet on the world economy and an income stream which the financial models said could only go one way.
The result was an over-ordering of all kinds of ships, all to be paid for some time in the future with credit from the limitless pockets of the banks.
Even in containers, where the freight rate boom was far more muted, the collective insanity took hold. Hapag-Lloyd's problem is not just that rates have plunged by 30% or more — though they have — it is not just that ships have been going at half speed for months to make voyages last longer and make the 30% of excess capacity less apparent, nor is it even that an estimated 500 container ships are parked up round the world standing idle. It is that, on top of all this, those ships which were over-ordered in the boom will soon be coming out of the yards of China and Korea — thanks in large part to soft loans from their governments who want to keep the yards open and operating.
These ships currently on order will add between 30% and 50% to global capacity, at a time when half the existing world fleet is less than five years old and therefore too young to consider scrapping.
And anyway, no one wants to take on the work of scrapping ships in anything like the volumes needed because steel and scrap prices are also on the floor so there is no money in that either.
An (adult) excuse to be cheerful
What with the recession and now swine flu it is a relief to have a positive story to tell.
There is a small company which floated on Aim three or four years ago, then called Amteus, which wanted to provide social networking sites for businesses to talk to suppliers and customers. But it never quite took off.
Now new management has come in, headed by Len Sanderson, the one-time advertising chief at the Telegraph, the business has a new name imJack and it has a new objective. Its customers are now schools. The technology of social networking will be used to create an interactive learning environment for teachers and children.
The teacher logs in through a PC and so do the children — just as easily and simply as they all do on Facebook.
They can then access common applications, be they video, learning games and shared files. No outsiders can get in.
But the real point — and why this is exciting right now — is that the children do not need to be in the classroom. They could just as easily be logged on from a computer at home. And this of course is where swine flu comes in. If the pandemic gets worse the Government may be forced to close the schools. Indeed it may have no choice if too many teachers succumb to the bug or too many parents decide their children are safer at home. But were this to happen, it does not mean that education has to grind to a halt. Widespread use of imJack's technology would allow lessons to continue remotely via the social networking site. The kids could just as easily be educated at home.
People in education are seriously excited by the possibilities of this technology and particularly at this time. The business angle is that the company is currently shaking the tin round the investment community for the relatively small amount of additional capital it needs to get its technology ready and sign up thousands of schools in the next few months, so that if the worst does happen and the schools do close, education can continue.
Now that, I think, is good news — though I concede that not all schoolchildren will agree.
Reader views (1)
This school intranet was implemented in Singapore when Sars hit and has been used ever since, esp now with H1N1 flu. It's also used when schools need to close for national oral exams for school leavers, for the rest of the school children. But there's always the fear that if all school kids have to be sequestered at home and all do their lessons online, the system simply can't cope.
- Elaine, Singapore, 17/08/2009 15:37
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