The financial crisis is creating some rough waters in the shipping industry.
Evidence is mounting that the credit crunch is obstructing global trade.
The drumbeats began in August when two Korean ship builders canceled orders because buyers weren’t able to produce initial payments.
The beat got louder as the Baltic Dry Index of shipping rates plunged. It’s now down more than 90% from its mid-May peak.
Then the Globus Maritime shipping company said on Friday it had to sell one of its ships for 29% below an earlier agreed-upon price. Globus, which is listed on London’s AIM exchange, blamed falling shipping activity and increasing difficulties in securing trade finance.
Broadly, shipping and commodities markets are rife with talk that banks are refusing to honor letters of credit from other banks and holding back guarantees commodity buyers and sellers need to ship all manner of metals and soft commodities.
Spurring some of the chatter early this month were the widely disseminated, gloomy remarks of a Thai shipping executive at an industry conference in Singapore. His view — that credit was frozen — was echoed by Moody’s Economy.com, which last week said stocks were piling up as cargo ships got stranded at ports pending the flow of financing. A Maersk Broker report made similar points.
The near-cessation of global credit is at the root of this particular rout.
Also in today’s Wall Street Journal, MARSHALL ECKBLAD wrote an article titled Shippers Hit by Credit Crunch where in he describes the trickle down effect of tightening credit on global shippers. Continue reading Global Shipping Has That Sinking Feeling