‘Recession Armada’ Of Empty Freighters Floats Off Asian Coast

Shipping is an industry that Americans know almost nothing about. We might be aware that port volumes are down in this country and that containers are piling up in port facilities like Long Beach or Elizabeth, NJ — but the broader nature of the business tends to be lost in a obscure realm of Liberian-flagged vessels, shadowy private firms, and some treaty known as the Law of the Sea.

But the Daily Mail has gotten an amazing scoop on the current state of this behemoth industry, revealing that there’s a huge “ghost fleet” of mothballed freight ships anchored off the coast of Malaysia:

Here, on a sleepy stretch of shoreline at the far end of Asia, is surely the biggest and most secretive gathering of ships in maritime history. Their numbers are equivalent to the entire British and American navies combined; their tonnage is far greater. [...]

They are a powerful and tangible representation of the hurricanes that have been wrought by the global economic crisis; an iron curtain drawn along the coastline of the southern edge of Malaysia’s rural Johor state, 50 miles east of Singapore harbour.

It is so far off the beaten track that nobody ever really comes close, which is why these ships are here. The world’s ship owners would prefer you not to see this symbol of the depths of the plague still crippling the world’s economies.

So they have been quietly retired to this equatorial backwater, to be maintained only by a handful of bored sailors. The skeleton crews are left alone to fend off the ever-present threats of piracy and collisions in the congested waters as the hulls gather rust and seaweed at what should be their busiest time of year.

Locals talk about a fleet so dense, the horizon is no longer visible. Which is no wonder, given how much rates have plunged: “This time last year, an Aframax tanker capable of carrying 80,000 tons of cargo would cost £31,000 a day ($50,000). Now it is about £3,400 ($5,500).”

This would normally be the time when the ships would zipping across the ocean stuffed with Christmas toys for all the western world’s girls and boys. But this year the traffic is light and the cost of moving a 40-foot container from China to Britain has fallen by more than 80 percent, to less than $300. “Commerce is contracting, fleets rust away - yet new ship-builds ordered years ago are still coming on stream.”

Today about 12 percent of global container fleet is idle and that number might well rise.

The phenomenon has its roots in the high-flying, easy-credit days of 2005, when Americans were buying Asian-made plasma teevees and similar knick-knacks with lucre from easy second mortgages on overvalued and poorly constructed exurban home-boxes, then pawning off bundles of the debt on stupid and careless German investors. With so much fake wealth buying so many manufactured goods, it seemed like there could never be enough ships–so shipmakers, particularly in Korea, took on a glut of orders and expanded their capacity to meet some insane assumed future demand.

Anyway, we all know the bigger story. But it’s still going, and the Malaysian ghost armada is one of the weird current symptoms of the continuing economic illness.