Why the global shipping industry is sinking

The global container-shipping business is in turmoil. The industry is set to lose as much as $10 billion this year, with 11 of the 12 biggest container lines reporting huge losses for the second quarter. A particularly stark example came this August, when more than 60 shipping containers carrying some $14.5 billion worth of goods were left stranded at sea because the company in charge, Hanjin Shipping Co., couldn't afford to pay docks their unloading fees.

What exactly is going on? The shipping industry is sinking, ironically, under the weight of too many ships. Analysts say since the global financial crisis, too many vessels have been built and not enough are being scrapped, which, in combination with declining growth in global trade, has led to plummeting freight rates. "Sending a container from Shanghai to Europe costs half what it did in 2014," The Economist reports.

Decreasing capacity could potentially ease the turmoil, but bigger lines see lower shipping rates as a way to push out weaker competition. Smaller companies simply cannot afford to reduce their fleets. Meanwhile, the holiday season is just around the corner — for American manufacturers and retailers, it's just about the worst time imaginable for supply chains to be breaking down.

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