The US economy is under siege and the dollar was the first casualty. Is economic recovery around the corner? If so, will recovery mean a return to the former economic state or something very different? For ocean carriers plying their craft, the dollar demise has kicked out an unprecedented flow of relatively low value exports from the US but slowed high value imports. The shift of tonnage to the more profitable Asia-Europe routes has resulted in some damage control to the carriers’ bottom lines. The real question lies in the future, with predictions of $150 or more per barrel of oil by the end of the decade, how can ocean carriers survive?By George Lauriat, AJOTThe United States economy has for a three consecutive quarters faltered and among business pundits the word “recession” is being tossed about with more frequency and less rebuttal. The finger pointing has begun in earnest, with former Federal Reserve Bank Chairman Alan Greenspan, the author of interest rate cuts in a time of a massive increase in Federal spending, clearly a target. While overseas, some economists claim that Europe and Asia can “detach” themselves from the US woes, others claim we (of the global economy) are all in this boat together and better get use to bailing. A key point in the economic debate is the impact of US dollar decline. For decades, a strong US dollar was bolstered by a booming domestic housing market and relentless consumerism that provided the ideal outlet to Asia’s and particularly China’s, role as the “world’s factory.” A strong US dollar and a weak Chinese Rmb (Renminbi) underscored a trade moving predominately from Asia to the US. This was reflected in a tremendous growth in box trans-Pacific box traffic. Back in the early 1990s, around 3.5 million teus moved from Asia to the US and about 2.4 million from the US to Asia. A combined total of less than six million transported teus. This year, the box tally should conservatively, tip 14.6 million teus Asia-US and 6.8 million teus US-Asia, or a trans-Pacific total in excess of 22 million teus. Some forecasts are considerably high with Asia-North America trade hitting This is an increase of nearly 20 million teus in less than two decades. The dramatic increase in transported boxes is evident among the carrier reports (see boxes transported chart on page 16). American President Lines (part of the Singapore-based NOL Group) in 2003 carried approximately two million teus. In just four years, APL had increased to 4.76 million teus transported. Over a similar period, Geneva-based Mediterranean Shipping Company (MSC) increased from around 4.4 million teus to 10 million teus. Denmark’s Maersk Line, the world’s largest carrier has regularly, topped 13 million teus. Interestingly, back in 2000 the freight rate (average all services) was around $1,130 per teu. Two years later it dropped to just a little over $800 a teu. And in 2007 made a push towards $1,350 (according to Containerisation International’s Freight Rate Indicators for the 3rd qtr ‘07, Asia –to-US rates were $1,700 and Asia-to-Europe $2,100). In short, the huge increase in box traffic didn’t result in a commensurate increase in freight rates. Simply put, ships (or more correctly slots) came on at a pace that exceeded demand, exacerbated by the imbalance of trade from Asia to North America. THE LONG SHIFT For ocean carriers plying their craft, the dollar demise has kicked out an unprecedented flow of relatively low value exports from the US but slowed high value imports. The shift of tonnage to the more profitable Asia-Europe routes has resulted in some damage control to the carriers’ bottom lines. The shift in liner services is significant and in OOCL’s 2007 annual report it was noted, “A combination of economic growth, strong exchange rates and an uptrend in outsourcing resulted in a bull market for cargo volumes with growth in the teens in consecutive years. In fact by 2008, the Asia-Europe trade will exceed the trans-Pacific in size, completing a cycle that saw t