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Revealed: The ghost fleet of the recession

Simon Parry

Last updated at 6:34 PM on 13th September 2009

biggest and most secretive gathering of ships in maritime history lies
at anchor east of Singapore. Never before photographed, it is bigger
than the U.S. and British navies combined but has no crew, no cargo and
no destination - and is why your Christmas stocking may be on the
light side this year

The 'ghost fleet' near Singapore

The 'ghost fleet' near Singapore. The world's
ship owners and government economists would prefer you not to see this
symbol of the depths of the plague still crippling the world's economies

The tropical waters that lap the jungle
shores of southern Malaysia could not be described as a paradisical
shimmering turquoise. They are more of a dark, soupy green. They also
carry a suspicious smell. Not that this is of any concern to the lone
Indian face that has just peeped anxiously down at me from the rusting
deck of a towering container ship; he is more disturbed by the fact
that I may be a pirate, which, right now, on top of everything else, is
the last thing he needs.

His appearance, in a peaked cap and uniform, seems rather odd; an
officer without a crew. But there is something slightly odder about
the vast distance between my jolly boat and his lofty position, which I
can't immediately put my finger on.

Then I have it - his
750ft-long merchant vessel is standing absurdly high in the water. The
low waves don't even bother the lowest mark on its Plimsoll line. It's
the same with all the ships parked here, and there are a lot of them.
Close to 500. An armada of freighters with no cargo, no crew, and
without a destination between them.

Simon Parry among the ships in southern Malaysia

Simon Parry among the ships in southern Malaysia

My ramshackle wooden fishing boat has floated perilously close to
this giant sheet of steel. But the face is clearly more scared of me
than I am of him. He shoos me away and scurries back into the vastness
of his ship. His footsteps leave an echo behind them.

a precarious course around the hull of this Panama-registered hulk, I
reach its bow and notice something else extraordinary. It is tied side
by side to a container ship of almost the same size. The mighty sister
ship sits empty, high in the water again, with apparently only the
sailor and a few lengths of rope for company.

Nearby, as we
meander in searing midday heat and dripping humidity between the hulls
of the silent armada, a young European officer peers at us from the
bridge of an oil tanker owned by the world's biggest container shipping
line, Maersk. We circle and ask to go on board, but are waved away by
two Indian crewmen who appear to be the only other people on the ship.

are telling us to go away,' the boat driver explains. 'No one is
supposed to be here. They are very frightened of pirates.'

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. Container ships, bulk carriers,
oil tankers - all should be steaming fully laden between China,
Britain, Europe and the US, stocking camera shops, PC Worlds and Argos
depots ahead of the retail pandemonium of 2009. But their water has
been stolen.

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.

Fisherman Ah Wat

'We don't understand why they are here. There are so many ships but no one seems to be on board,' said local fisherman Ah Wat

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 and
government economists would prefer you not to see this symbol of the
depths of the plague still crippling the world's economies.

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.

Local fisherman
Ah Wat, 42, who for more than 20 years has made a living fishing for
prawns from his home in Sungai Rengit, says: 'Before, there was nothing
out there - just sea. Then the big ships just suddenly came one day,
and every day there are more of them.

'Some of them stay
for a few weeks and then go away. But most of them just stay. You used
to look Christmas from here straight over to Indonesia and see nothing
but a few passing boats. Now you can no longer see the horizon.'

size of the idle fleet becomes more palpable when the ships' lights are
switched on after sunset. From the small fishing villages that dot the
coastline, a seemingly endless blaze of light stretches from one end of
the horizon to another. Standing in the darkness among the palm trees
and bamboo huts, as calls to prayer ring out from mosques further
inland, is a surreal and strangely disorientating experience. It makes
you feel as if you are adrift on a dark sea, staring at a city of

Ah Wat says: 'We don't understand why they are here.
There are so many ships but no one seems to be on board. When we sail
past them in our fishing boats we never see anyone. They are like real
ghost ships and some people are scared of them. They believe they may
bring a curse with them and that there may be bad spirits on the

Two container ships tied together in Sungai Rengit, southern Malaysia

Two container ships tied together in southern Malaysia, waiting for the next charter

As daylight creeps across the waters, flags of convenience from
destinations such as Panama and the Bahamas become visible. In reality,
though, these vessels belong to some of the world's biggest Western
shipping companies. And the sickness that has ravaged them began far
away - in London, where the industry's heart beats, and where the
plummeting profits and hugely reduced cargo prices are most keenly

The Aframax-class oil tanker is the camel of the world's
high seas. By definition, it is smaller than 132,000 tons deadweight
and with a breadth above 106ft. It is used in the basins of the Black
Sea, the North Sea, the Caribbean Sea, the China Sea and the
Mediterranean - or anywhere where non-OPEC exporting countries have
harbours and canals too small to accommodate very large crude carriers
(VLCC) or ultra-large crude carriers (ULCCs). The term is based on the
Average Freight Rate Assessment (AFRA) tanker rate system and is an
industry standard.

A couple of years ago these ships would be steaming back and forth. Now 12 per cent are doing nothing

may wish to know this because, if ever you had an irrational desire to
charter one, now would be the time. 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 is why the
chilliest financial winds anywhere in the City of London are to be
found blowing through its 400-plus shipping brokers.

them, they manage about half of the world's chartering business. The
bonuses are long gone. The last to feel the tail of the economic
whiplash, they - and their insurers and lawyers - await a wave of
redundancies and business failures in the next six months. Commerce is
contracting, fleets rust away - yet new ship-builds ordered years ago
are still coming on stream.

World shipping is tracked by satellite service Vesseltracker

World shipping is tracked by satellite service Vesseltracker

Just 12 months ago these financiers and brokers were enjoying fat
bonuses as they traded cargo space. But nobody wants the space any
more, and those that still need to ship goods across the world are
demanding vast reductions in price.

Do not tell these men and
women about green shoots of recovery. As Briton Tim Huxley, one of
Asia's leading ship brokers, says, if the world is really pulling
itself out of recession, then all these idle ships should be back on
the move.

South China Sea map

'This is the time of year when everyone is doing all the Christmas stuff,' he points out.

couple of years ago those ships would have been steaming back and
forth, going at full speed. But now you've got something like 12 per
cent of the world's container ships doing nothing.'

are oil bearers. But the slump is industry-wide. The cost of sending a
40ft steel container of merchandise from China to the UK has fallen
from £850 plus fuel charges last year to £180 this year. The cost of
chartering an entire bulk freighter suitable for carrying raw materials
has plunged even further, from close to £185,000 ($300,000) last summer
to an incredible £6,100 ($10,000) earlier this year.

for bulk carriers has picked up slightly in recent months, largely
because of China's rediscovered appetite for raw materials such as iron
ore, says Huxley. But this is a small part of international trade, and
the prospects for the container ships remain bleak.

experts believe the ratio of container ships sitting idle could rise to
25 per cent within two years in an extraordinary downturn that shipping
giant Maersk has called a 'crisis of historic dimensions'. Last month
the company reported its first half-year loss in its 105-year history.

Stopford, managing director of Clarksons, London's biggest ship broker,
says container shipping has been hit particularly hard: 'In 2006 and
2007 trade was growing at 11 per cent. In 2008 it slowed down by 4.7
per cent. This year we think it might go down by as much as eight per
cent. If it costs £7,000 a day to put the ship to sea and if you only
get £6,000 a day, than you have got a decision to make.

'Yet at the same time, the supply of container ships is growing.
This year, supply could be up by around 12 per cent and demand is down
by eight per cent. Twenty per cent spare is a lot of spare of anything
- and it's come out of nowhere.'

These empty ships should be
carrying Christmas over to the West. All retailers will have already
ordered their stock for the festive season long ago. With more than 92
per cent of all goods coming into the UK by sea, much of it should be
on its way here if it is going to make it to the shelves before

Large ships off the coastline close to Sungai Rengit

Lights from the fleet of ships illuminate the night-time horizon

retailers are running on very low stock levels, not only because they
expect consumer spending to be down, but also because they simply do
not have the same levels of credit that they had in the past and so are
unable to keep big stockpiles.

Stopford explains:
'Globalisation and shipping go hand in hand. Worldwide, we ship about
8.2 billion tons of cargo a year. That's more than one ton per person
and probably two to three tons for richer people like us in the West.
If the total goes down by five per cent or so, that's a lot of cargo
that isn't moving.'

The knock-on effect of so many ships
sitting idle rather than moving consumer goods between Asia and Europe
could become apparent in Britain in the months ahead.

will find out at Christmas whether there are enough PlayStations in the
shops or not. There will certainly be fewer goods coming in to Britain
during the run-up to Christmas.'

Three thousand miles
north-east of the ghost fleet of Johor, the shipbuilding capital of the
world rocks to an unpunctuated chorus of hammer-guns blasting rivets
the size of dustbin lids into shining steel panels that are then
lowered onto the decks of massive new vessels.

As the shipping
industry teeters on the brink of collapse, the activity at boatyards
like Mokpo and Ulsan in South Korea all looks like a sick joke. But the
workers in these bustling shipyards, who teem around giant tankers and
mega-vessels the length of several football pitches and capable of
carrying 10,000 or more containers each, have no choice; they are
trapped in a cruel time warp.

There have hardly been any new orders. In 2011 the shipyards will simply run out of ships to build

decade ago, South Korean President Kim Dae-jung (who died last month)
issued a decree to his industrial captains: he wished to make his
nation the market leader in shipbuilding. He knew the market
intimately. Before entering politics, he studied economics and worked
for a Japanese-owned freight-shipping business. Within a few years he
was heading his own business, starting out with a fleet of nine ships.

by 2004, Kim Dae-jung's presidential vision was made real. His
country's low-cost yards were winning 40 per cent of world orders, with
Japan second with 24 per cent and China way behind on 14 per cent.

shipbuilding is a horrendously hard market to plan. There is a
three-year lag between the placing of an order and the delivery of a
ship. With contracts signed, down-payments made and work under way,
stopping work on a new ship is the economic equivalent of trying to
change direction in an ocean liner travelling at full speed towards an

Thus the labours of today's Korean shipbuilders merely
represent the completion of contracts ordered in the fat years of 2006
and 2007. Those ships will now sail out into a global economy that no
longer wants them.

Maersk announced last week that it was
renegotiating terms and prices with Asian shipyards for 39 ordered
tankers and gas carriers. One of the company's executives, Kristian
Morch, said the shipping industry was in uncharted waters.


As he told the global shipping newspaper Lloyd's List only
last week: 'You have a contraction of oil demand, you have a falling
world economy and you have a contraction of financing capabilities -
and at the same time as a lot of new ships are being delivered.'

peaked in 2005 when, with surplus tonnage worldwide standing at just
0.7 per cent, ship owners raced to order, fearing docks and berths at
major shipyards would soon be fully booked. That spell of 'panic
buying' has heightened today's alarming mismatch between supply and

Keith Wallis, East Asia editor of Lloyd's List,
says, 'There was an ordering frenzy on all types of vessel,
particularly container ships, because of the booming trade between Asia
and Europe and the United States. It was fuelled in particular by
consumer demand in the UK, Europe and North America, as well as the
demand for raw materials from China.'

Cranes at Singapore Dock stand idle, waiting for work

Cranes at Singapore Dock stand idle, waiting for work

for most existing ships to be delivered within the next six to nine
months would be honoured, he predicted, and the ships would go into
service at the expense of older vessels in the fleet, which would be
scrapped or end up anchored off places like southern Malaysia.

says Wallis, 'some ship owners won't be able to pay their final
instalments when the vessels are completed. Normally, they pay ten per
cent down when they order the ship and there are three or four stages
of payment. But 50 to 60 per cent is paid on delivery.'

Korean shipyard Hanjin Heavy Industries last week said it had been
forced to put up for sale three container ships ordered at a cost of
£60 million ($100 million) by the Iranian state shipping line after the
Iranians said they could not pay the bill.

'The prospects for
shipyards are bleak, particularly for the South Koreans, where they
have a high proportion of foreign orders. Whole communities in places
like Mokpo and Ulsan are involved in shipbuilding and there is a lot of
sub-contracting to local companies,' Wallis says.

'So far the
shipyards are continuing to work, but the problems will start to emerge
next year and certainly in 2011, because that is when the current
orders will have been delivered. There have hardly been any new orders
in the past year. In 2011, the shipyards will simply run out of ships
to build.'

Christopher Palsson, a senior consultant at London-based Lloyd's
Register-Fairplay Research, believes the situation will worsen before
it gets better.

'Some ships will be sold for demolition but
the net balance will be even further pressure on the freight rates and
the market itself. A lot of ship owners and operators are going to find
themselves in a very difficult situation.'

The current downturn is the worst in living memory and more severe even than the slump of the early Eighties, Palsson believes.

then the majority of the crash was for tankers carrying crude oil.
Today we have almost every aspect of shipping affected - bulk carriers,
tankers, container carriers... the lot.

'It is a much
wider-spread situation that we have today. China was not a major player
in the world economy at that time. Neither was India. We had the Soviet
Union. We had shipbuilding in the United Kingdom and Europe.

'But then, back in those days the world was a very different place.'

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