25 November 2008

Crunch leaves shipping high and dry

This article is excerpted from the 25 November 2008 edition of “globeandmail.com”.

Shipping companies around the world are poised to delay their orders for new vessels, renegotiate contract terms and even cancel deliveries as the global financial crisis sends the industry into dire straits.

The credit crisis has "reduced levels of economic activity, raw material demand, trade and the requirement for ships," London-based Drewry Shipping Consultants says in a bleak forecast.

With freight rates plummeting and asset values tumbling, shipping firms already in financial difficulty are having trouble obtaining financing, casting doubt on orders for new vessels….

Shipyards, backed up with orders before the financial crisis, could be forced to consolidate. …

Drewry said major lenders to the ocean shipping sector are burdened by writedowns and the credit crunch. "It has become very difficult to syndicate debt deals," said Drewry….

The report forecasts that "funding will eventually flow to the sector, albeit on more onerous terms."…

The Baltic dry index … has nosedived to its lowest level in nearly a decade. After setting a record high of 11,793 points in May, the index has plunged 93 per cent. Yesterday, the index fell 12 points to 824 points.

The Drewry report said there is an oversupply of ships in the dry bulk sector, while the market for oil tankers and container vessels are "showing a more balanced position."….