Just two years ago, ships literally lined up at sea, waiting to offload cargo at overrun ports around the world.
You would see them sitting off the beach in a row. Some took cargo thousands of miles around peninsulas to far-flung alternative ports because the lost time was more expensive than sitting at anchor for days.
The Baltic Dry Index — the benchmark for commodity shipping costs — fell below 1,000 for the first time in six years as tight credit slowed global trade, Bloomberg reports.
The gauge has dropped 89 percent this year, driving down the combined market capitalization of the 12-company Bloomberg Dry Ships index to $5.5 billion from $32 billion a year ago.
“You are getting very, very close to the cost of just crewing and running a ship,” observes Simpson, Spence & Young Senior Director Richard Haines.
“It can't go much lower than this without owners deciding they don't want their ships employed.”
The drop is leading ship owners to avoid taking on new shipping orders, which in turn has left at least 20 percent of vessels involved in steel-industry supply sitting empty.
Steelmakers are cutting output, too, as dwindling trade credit halts deliveries.
"There are simply no cargoes,” Lorentz & Stemcor A/S shipbroker Kevil Sauvé told Bloomberg.
“It's primarily the steel market but it's even more difficult due to financial markets and letters of credit in particular.”
Zodiac Maritime Agencies Ltd. Said earlier this month that it could idle 20 ships — about 5 percent of the fleet operating in the spot market — which typically haul coal and iron ore.
Fleet owners are also slowing the speed at which shipping vessels run in order to lower fuel costs.
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