Ships travel to and from the manufacturing and trading hubs of southern China through the Lamma channel, and it is still busy.
But the ships once sitting heavily in the water, loftily loaded with containers, are now visibly higher in the water.
There is less cargo moving around the world, so less need for ships. Hence, dramatically lower rates for hiring large ships, and so a growing crisis in world shipping.
As the China boom deflates, demand for steel, iron ore and other bulk items from around the world diminishes, leaving bulk carrying ships all dressed up with nowhere to go.
"If you sit in one of the glamorous bars on the south side of Hong Kong, especially in the evening, you will see the lights of lots of ships," says Tim Huxley, chief executive of Wah Kwong Shipping, one of Hong Kong's largest ship-owners.
"Those ships are sitting there, waiting," he says.
"Those are bulk carriers and container ships that haven't got anywhere to go at the moment, there's no cargo for them to carry.
"They're sitting waiting for instructions, waiting for an upturn in trade that will see them moving again, carrying the raw materials that are needed to make the finished goods that are then exported out of southern China to the markets of the West."
Lay-up
Hong Kong has about 70 ships in "hot lay-up" at the moment, meaning they are waiting with full crews. Singapore has several hundred ships in "cold lay-up", where the ships are without crew.
A more long-term parking operation such as this is discouraged in the typhoon-laden Hong Kong waters.
This kind of waiting carries large hidden costs - looking after the crews and preparing to clean the ship's hulls in Hong Kong, and the rising risk of collision in the crowded seas.
The ports of southern China are busy with building, scrapping and repair
Far starker is the fact that ship owners, and often long chains of charterers and sub-charterers, are paying massive day-rates on ships that are earning nothing for them.
"The whole shipping market starts to unravel," says Chris Howse, a leading shipping lawyer and partner of Richards Butler, who is busier than ever at times like these.
"It went from an extreme," he says. "There were examples quoted in the press of this type of ship which was earning $150,000 (£102,000) a day, then the price crashing right down to $5,000 a day. That will not cover the operating costs of the ship."
There have even been cases where an owner was seeking to hire out his ship on a voyage from India to China for the cost of the fuel and the crew.
Charter chains
A ship owner will typically rent out, or charter, a ship for a fixed rate over a number of years and the charterer will often sub-charter that ship on to a sub-charterer for a higher rate and a shorter period.
Hong Kong provides not just ports, but full shipping services
Such chains can go up to six or seven sub-charterers and, in current times, can break when any one of those in the chain starts experiencing problems.
That is when the shipping lawyers come in.
Given Hong Kong's legal system, it is where most of the China shipping trade is serviced and where such problems as these are handled.
Chris Howse describes how a troubled charterer is currently tackling the lack of trade and trade finance.
"It is a matter of saying to the owners, 'we have an excellent business relationship, we basically need to renegotiate the terms of our charter'," he says.
"'I don't want to give you your ship back. If I give you your ship you won't be able to do much with it, because there are lots of ships sitting idle with no work at all. You may have an enormous claim against me, but I may or may not be able to pay that claim because these claims can be extremely large'."
If new arrangements cannot be reached, companies start to hit the wall, such as Britannia Bulk, Atlas shipping, or several Korean shipping companies.
The troubles that are afflicting Armada Singapore, which has applied for a Scheme of Arrangement with its creditors, have had a significant impact on a large number of shipping and trading companies. It lists more than 64 creditors.
History helps?
The surprising fact in Hong Kong is that, so far, no major ship-owning company is in dire straits.
Tim Huxley and other experts agree that Hong Kong owners, many of whom can trace a long history back to Hong Kong's founding as a major world port, are traditionally conservative and careful.
In Hong Kong we have an industry that's positioning itself for what could be a longer haul in terms in our sector-specific recession, than what we have in the global slowdown overall
Tim Huxley, chief executive
Wah Kwong Shipping
"I can think of many Hong Kong owners who are not adversely affected by this at all because their gearing, the financing on their ships, is so low, or they're debt-free, so they don't have a problem," says Mr Howse.
"Similarly, a number of Hong Kong's chartering and trading groups are weathering the storm well, because they called the market right - Hong Kong's Noble Group being a good example.
They have been "smarter or luckier depending on how they've played the market".
Order book
But what is exercising the minds of the many shipping experts based in Asia's maritime centre is that even when world trade recovers, shipping will still face trouble.
"In Hong Kong we have an industry that's positioning itself for what could be a longer haul in terms in our sector-specific recession, than what we have in the global slowdown overall," says Mr Huxley.
Container ships in Hong Kong waters are much higher in the water
That is because of the huge number of ships on order, following a massively over-enthusiastic ship-ordering spree in recent years.
This over-investment can be seen, for example, in the sector of cape-size bulk carriers, ships that carry more than 100,000 tonnes, mainly engaged in iron ore trades, carrying iron ore from Brazil or Australia to China.
"In that sector of the shipping market, 105% of the fleet is currently on order, so that means there are more ships being built, than currently exist," Mr Huxley pointed out.
These and many other ships were ordered in the last three years at top prices, so their asset value has now declined. And there is much less money available to finance them.
Shipyards are still building, and the scrap yards of India and Bangladesh are booming as some ships are now being sold for scrap at a faster rate.
But even if world trade picks up, shippers face a huge over-supply of ships, and plunging rates for renting them out.
The love affair between Wall Street and shipping is over, and the industry is hunkering down to face a long and painful recession.
Source: http://news.bbc.co.uk/2/hi/asia-pacific/7973752.stm, 6 April 2009
