Saturday, November 29, 2008
November 28th, 2008 / Week 48
"FOR A FISTFULL OF DOLLARS"
As the dry freight market continues its fall (not over a cliff - since this has already happened), with the BDI losing 14.5% week to week, everyone now wonders how long this will last and whether the shipping world should gear-up for an "old wild-west" related market environment where owners will be competing for a "fistful of dollars". We have noted a cape getting US$ 1000 per day for a spot trip while all the recent panamax "relative gains" seem to be fading.
The uncertainty still remains at least for the short run or at least until the shipping market sees some light in end of the tunnel as far as the financial crisis is concerned, with letters of credit in particular. It is estimated that 80% of the world trade is based on letter of credits who have been badly hit. We tend to believe that letter of credit is the major cause of this sharp fall in freight rates as a result of the sudden stiffening of cargoes moved world-wide.
However, this is not the only one. Let’s not forget that what we are experiencing now has been the result of a "chain reaction" which started from the US sub-prime crisis and continues to spread to financial markets all over the world. Relatively so, the actual economies seem to be heading for recession, with Japan already leading the way. Of course we expect the impact of this crisis to deepen as more and more economies enter a recession.
So, is there any hope for the market to return at respectable levels in the sort/medium run? All bids in China please!!!
As everyone carefully monitors the stock piles of raw materials in the Chinese ports slowly decreasing, hoping that the pace will become faster and soon demand for re-stocking will occur, the S&P market is getting more and more active every week. We are reporting several and very interesting sales of all types and ages of bulkers the number of which tends to remind us the pre-August 2008 dates. New market levels have now been set although a substantial number of sellers still holding for better prices.