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December 08, 2008 09:38PM
http://www.time.com/time/business/article/0,8599,1864840,00.html?xid=rss-topstories/

As the World Economy Sinks, So Does Global Shipping

Take a stroll along your proverbial Main Street, and you may see signs of the global financial crisis moving into the real economy. You can also head straight to the nearest major port. There may be no more serious warning of the potential reach and depth — and duration — of the worldwide economic slowdown than the sinking fortunes of the shipping industry.

From reduction of traffic on key trade routes to the cancellation of new ship orders to plummeting cargo rates, transport-by-sea is a very real gauge of declining demand across the globe for raw materials and consumer products. With some 77% of worldwide trade arriving by sea, "shipping is the thermometer of globalization," notes professor Oliviero Baccelli, a transportation economist at Bocconi University in Milan. "It allows us to take the broadest view of the health of the worldwide economy." (See pictures of the recession of 1958.)

And from the docks of Rotterdam to Seattle to Shanghai, the troubling symptoms abound. The Baltic Dry Index, which measures world shipping charges for raw materials, has plummeted from a high of 11,793 in May to 672, its lowest level since soon after the index was established, in 1985. Daily-rental rates for the largest Capesize category of carrier have plunged from $234,000 just two months ago to $2,320, a fall of a staggering 99%. Jeremy Penn, president of the London-based Baltic Exchange, cautions that bulk rates are prone to fluctuation and have been hit particularly hard this time by the skittishness in financial markets, as the necessary letters of credit for commodity purchases have grown more difficult to come by. Still, Penn says, the recent drop in bulk-cargo fees is unprecedented, citing declining worldwide demand, particularly as the economic slowdown reaches China. "The violence of the drop (in rates)," he says, "is more extreme than anything we've ever seen before."...........

............Even seasoned shipowners, however, are facing a storm unlike any they've seen before. Right now, the tangible signs of a lasting retrenchment are popping up in ports and along sea routes across the globe. The CKYH consortium of two of the largest Chinese and two South Korean shipping firms has just announced that six routes will see either a suspension of service or a reduction in capacity. Service will be halted on the Mediterranean-Asia-America pendulum service early next year, while CKYH has already reduced its capacity from Asia to the U.S. East Coast by some 18%. (See pictures of the global financial crisis.)

Perhaps even more worrisome for the long-term outlook is the rush to cancel orders of new ships. In November, New York–based Genco Shipping and Trading was willing to kiss goodbye to a $53 million deposit in order to get out of a half-a-billion-dollar deal to buy six new vessels. Clarkson Plc, the world's largest shipbroker, announced that while 378 ships were ordered in October 2007, only 37 were ordered in October 2008...........
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Wizard 1055December 01, 2008 08:20PM

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