Monday, December 08, 2008
Dry bulk rates hit 22-year lows as crisis deepens
Monday, 08 December 2008
Another week ended with Baltic Dry Index at new lows, this time plunging at 663 points, losing 52 points throughout the week, or about 7 percent. This marked the lowest point since the 2nd of June 1986, i.e. more than 22 years ago, with the market poised to drop at even lower levels this week, if the lack of cargoes maintains its resilience. The BCI, which tracks capesize demand, managed to post modest gains of 4 percent on the week, but the Panamax index almost collapsed, shedding 118 points, which translates at nearly 19 percent. Similarly, the Supramax index lost 74 points or 12 percent. Meanwhile, it’s important to note that Chinese banks are injecting billions to support selective shipyards in an effort to stop defaults on order that have already been secured. According to the latest report by Weberseas, up to 25 percent of all ships currently on order face cancellations. During the week, Golden Ocean (John Fredriksen's dry bulk company) has stopped its stake increase process in Navios Maritime Holdings. “They recently built up their stake to 5% (in total 5.3 mill shares were acquired at around USD 48 mill) but the decision has now been taken to stop any further increase of their stake and instead concentrate on reducing their USD 1.6 bill n/b exposure” Weberseas said.
Another broker, N. Cotzias shipping group, one of the oldest in the business, said in its November monthly report that all types of dry cargo ships have seen their values dropping in perfect correlation with the sharp drop in the freight market. “The percentage of second hand price drop ranges from -70% to -85% compared June’s and July’s peak prices” said Cotzias. Similarly, time charter daily rates have gone rapidly down by approximately -92% to -97% and rates of $170,000 and $200,000 plus per day were replaced by the end of November by rates of $5,000 and $6,500 usd/day.
From the demolition front, news are that more and more vessels are withdrawn from the market, even as scrap prices were down to a mere $200/ldt in November, when just one month before they stood at $500+/ldt. That didn’t stop 57 vessels from being sold for scrap during the previous month, a number reached for the first time since January and April of 2004. Out of them, 21 ships, or 37 percent of the tonnage sold, were owned by Hellenic shipping companies, according to N.Cotzias.
Weberseas added that perhaps it is better to go along with a lower price but with a quality scrap buyer rather than selling high and getting disappointed and frustrated in the end”.
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