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Worldwide shipping rates set to tumble 74% |
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Thursday, 09 April 2009 |
 Global shipping rates are primed for a wrenching 74 per cent plunge in 2009 as commodity demand continues to fall in Asia and the massive glut of vessels ordered during the boom years finally hits the oceans. The expected collapse in rates, which could push dozens of shipowners close to bankruptcy, follows a 92 per cent decline in the
Baltic Dry Index (BDI) of shipping rates over the course of last year.
The misery is expected to continue well into 2010, with a further 15
per cent drop in rates before any rebound brings relief to fleet owners.
The closely-watched gauge of world trade in iron ore, coal and other
bulk cargoes has fallen for 19 straight days – the same ferocity of
decline that followed the collapse of Lehman Brothers and the
catastrophic freezing of trade finance.
The stark warning of a continuing collapse in the BDI, issued by
analysts at Nomura Securities in Hong Kong, comes despite industry
predictions of multiple order cancellations by shipowners and forecasts
that record numbers of vessels may be put into storage. According to
the gloomiest forecasts, fleet owners may lay-up the greatest number of
ships since the oil crisis of the 1970s.
But these measures, however drastic, may not be enough to fight further
alarming declines in freight rates. Even if 40 per cent of worldwide
order books are cancelled this year, the slump in global demand and the
sharp rise in Chinese inventories of iron ore and coal, say analysts,
suggest that the worst is yet to come.
“We expect industry fundamentals [for bulk carriers] to deteriorate
further as demand continues to remain weak and the large order book
begins to be delivered,” wrote Nomura’s Andrew Lee in a note to
clients. On container shipping, the outlook is similarly miserable:
“International routes are loss-making and are likely to remain so,” he
said.
Chinese imports of iron ore are falling because, despite Beijing's
promise of massive infrastructure spending as part of the country’s
vast $586 billion stimulus package, the pace of construction has slowed
dramatically. Iron ore inventories loaded up along the docksides at
Chinese ports are thought to have swollen by about eight million tons
over the course of February, while the country’s exports of finished
goods – the sort that used to fill container ships bound for the US and
Europe – continue to fall.
About 10 per cent of the world's 10,650 in-service container ships and
bulk carriers are currently sitting empty and at anchor waiting for
cargoes that are simply not emerging, said one London-based shipbroker.
He added that as many as 500 ships of various types may be put into
more permanent stasis to save their owners money as the recession runs
its course. The waters off the coasts of Malaysia, Indonesia and the
Philippines are expected to become the favoured parking lots for the
world’s mothballed fleets.
To meet that impending demand, the world’s largest shipping services
group, Inchcape, has launched a global lay-up service to ensure that
any vessels put into hibernation are able to emerge in good working
order. “The decision to lay-up a ship is not an easy one for a
shipowner but we are giving the market what it needs right now,” said
Inchcape’s Narayanan Shankar in Singapore.
Japan’s balance of payment figures, released yesterday by the country’s
Ministry of Finance, provided yet another grim snapshot of the drop-off
in world consumer demand and troubles facing the shipping industry.
Exports and imports for the world’s second-biggest economy fell by
about 50 per cent in February, with much of the decline due to the
collapse in the once white-hot trade movement of components and
half-finished goods around Asia.
Source: Times
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