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Saturday, February 14, 2009

Greek vessels lay idle as financial crisis hits shipping

Saturday, 14 February 2009

In good times, Greek vessels criss-crossed the seas on global trade routes taking international crews around the world to discharge huge containers full of goods. Today, an eerie calm pervades for miles outside the bustling port of Pireaus, as hundreds of vessels, namely bulkers and tankers float idly, waiting for cargo. Shipping, normally an industry of peaks and dips, is currently facing one of the worst crisis' in decades and many experts say the scene off the port of Piraeus, with vessels anchored and awaiting orders is being repeated at dozens of other ports across the world.
"Charter rates for dry cargo vessels are at their lowest since 1985 and this makes it very difficult for vessels to break even after loan installments and operating expenses," says Giorgos Gratsos, president of the Hellenic Shipping Federation and owner of Standard Bulk Transport.
The global economic crisis has drastically slashed consumer spending and forced industries to cut down on production, resulting in a much lower volume of trade.
As a result, the shrinking demand has dramatically hit ship owners and charterers, with many cargo ships leaving ports half empty or being "layed up" - in other words parking them for months near a port with a few watchmen on board instead of continuing to operate the vessels at a loss.
On top of that, the credit crunch has made banks nervous and reluctant to lend money to shipowners. The majority, as a result of the credit crunch, are also hesitant to provide financial guarantees or letters of credit - payment guarantees issued to exporters for cargoes worth several hundred million dollars.
Shipping analysts say ships that earned 50,000 dollars a day a few months ago are now struggling to take in 9,000 dollars a day as higher rates dropped by 90 per cent within a matter of weeks.
One shipping expert who asked to remain anonymous says people who had bought ships during the past six months did so when the market was at its peak and now these ships are receiving daily hire much less than their break-even rates, thus making a loss.
Rates have varied depending on route and time but according to analysts, the dry bulk market, where commodities such as grain, steel or coal carried has been hit harder than the wet market, where crude oil, gas or petrol is transported.
Many say the scene evokes painful memories of the 1980s crisis when hundreds of huge dry bulk vessels were laid up side by side starting from the port of Pireaus and ending up at the island of Salamina, unable to find charterers as the market dried up.
"The general consensus is that over the next few months a number of owners and charterers will not survive as demand for commodities remains low, insurance premiums are set to increase and the number of new vessels are expected to hit the market thereby increasing the pressure on freight rates, particularly on older vessels," George Lambrou, a partner at Thomas Cooper, a London-based firm of solicitors specializing in maritime and trade law.
For Greece, which owns a fifth of the world's fleet and where shipping accounts for 7 per cent of GDP, that spells trouble.
At 160 million tonnes, its merchant fleet is the largest in the world, ahead of Japan with 4,173 ships, Hellenic Union of Shipping figures show.
The picture was completely different six months ago.
Enjoying a five-year boom of rising commodity prices and disrupted trading which lead to increased charter rates, many shipping magnates ordered new ships while still keeping older ships in service - reluctant to decommission them and sell them for scrap when they could still be taking advantage of good rates.
In many cases today, companies with old vessels are now selling them for scrap in the Far East at reduced prices while others are canceling orders and even forfeiting advances paid to shipyards which often run into the millions of dollars.
Genco, for example founded by Peter Georgiopoulos, cancelled a 530 million dollars deal for six vessels, forfeiting a 10 per cent deposit. Shipping analysts estimate that a third of worldwide orders may be called off.
For those forced to sell, even the resale value of new and modern vessels has fallen. According to an estimate offered by one expert, a 10-year-old Panamax bulk carrier vessel which was worth around 75 million dollars six months ago is now worth approximately 27 million dollars.
For those fortunate Greek owners with access to credit or piles of cash accumulated during the good times, this will undoubtedly mean new opportunities.
Source: DP

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