Thursday, October 16, 2008

Admist The Plunging Baltic Dry Index, Dr. Marc Faber Warns That Some Shipping Lines Could Go Bankrupt!


Let me say again... WOW!

The Baltic Dry Index has continued to plunge in a rather most dramatic fashion!

As can be seen, the Baltic Dry Index has plunged anoter 10% or 194 points! The Baltic Dry Index is now at 1615 points!

Holy mama cow!

From the UK Guardian: Baltic sea freight index falls to 5-1/2 year low.

Comments made by Nick Collins is most worrying!

  • The index has seen some of the biggest falls in its 23-year history in the last week as the deepening financial crisis and slowing demand in China saps confidence.

    "It's meltdown isn't it...we're close to the bottom, but it probably will go lower," said Nick Collins, director of dry trade at Clarkson PLC ship consultancy in London.

    "It's very serious because it's triggering a lot of defaults in the market and that could have a knock-on effect," he said, without specifying what that would be.

    Collins was referring to charterers who had hired merchant ships for contracted periods of time but were returning them early because there was no longer a commercial incentive to keep them trading.

    "The fear is that this will trigger a number of financial embarrassments, though I don't think that kind of thing is going to bring anybody down at the moment," Collins said.

    Analysts have said that falling ocean freight prices to move goods and resources in the other two main ship sectors, containers to move finished goods, and tankers to deliver oil, point to slowing international trade.

    "These indexes are the evidence that that is true," Collins said.

    Container trade ferrying manufactured goods on some of the world's top export routes, between Asia and the U.S. west coast, and between Asia and Europe, have also been hammered.

    "And that's all because of looming recession in the Western world," Collins said.

    "People have been concentrating on the banks but this is evidence that it (the crisis) is filtering out in the real economy and that trade is collapsing," he said.

    Sea freight prices for dry commodities usually peak in the fourth quarter on utility demand for coal in Asia and the start of the export season for American grains.

    Analysts pin much of the slump on slowing demand for iron ore and coal in China. Stocks are high there, at a time when some of China's largest steelmakers have cut supply because of a slowdown in manufacturing.

    Iron ore and coal demand are major drivers of sea freight prices for dry bulk resources, accounting for about half of the world's trade between them on the dedicated fleet.

And if you think that is bad enough, have a look at the following commentary posted on Economic slump may push shipping lines into bankruptcy, says investor

And which investor?

Dr. Marc Faber!

  • SINGAPORE—The global economic slowdown will push some shipping lines into bankruptcy as demand for commodities cools and trade slows, investor Marc Faber said.

    “This is an industry that could be hit harder than what has been expected,” Faber, who predicted the 1987 stock-market crash, said in an interview Monday in Singapore. “We are really at the very beginning of an economic slump, and it could last for quite sometime.”

    The Baltic Dry index, a measure of commodities-shipping costs, has plunged 82 percent in the past year as Chinese steelmakers have cut iron-ore imports on slower demand. Container rates have also fallen because US and European consumers are buying less Asian-made furniture, toys and clothes.

    “There has been an acute and significant decrease in near-term demand for shipping capacity,” Jon Windham, Winnie Guo and Yumi Park, analysts at Macquarie Group Ltd., wrote in an October 9 report. “The primary cause is a significant fall off in general demand driven largely by companies’ fears to extend cash.”

    Svithoid Tankers AB, a Swedish shipping line, said Monday that it intends to file for insolvency liquidation after failing to secure new financing.

    Companies worldwide are struggling to secure credit as the collapse of Lehman Brothers Holdings Inc. and the wider economic slowdown have caused banks to cut lending because of increased concerns about getting their money back.

    Shipowners will also likely find it more expensive to get funding, according to Faber, managing director of Marc Faber Ltd. and publisher of the “Gloom, Boom & Doom” report. The maritime sector needs about $300 billion over the next three to four years to fund the construction of vessels already on order, according to Nordea Bank Finland Plc., the largest lender to the sector last year.

    The credit crunch may also impact shipping by making it harder for traders to secure letters of credit, the financing notes that are to key to many transactions.

    “The banks don’t trust each other,” Faber said. “Some shipments may be delayed because of fears the letter of credit won’t be accepted by another bank.” -- Bloomberg

Other recent postings made on the Baltic Dry Index:

1. Views On Current Weakness On Baltic Dry Index
2. The Collapse of the Baltic Dry Index
3. Goldman Downgrades Bulk Shippers!
4. Baltic Dry Index Keeps Falling!
5. Baltic Dry Index Stages Strong Rebound!
6. Baltic Dry Index Set For Strong Recovery???
7. Baltic Dry Index Plunges To Seven Month Lows!
8. The Baltic Dry Index Keeps On Plunging!
9. Baltic Dry Index Continues To Plunge
10.The Plunging Baltic Dry Index And The Dangers Of Using Forward PE!
11. Baltic Dry Plunges Below 2000!!!