# Shipping Slump Looming



## fred henderson (Jun 13, 2005)

Things are looking gloomy for the world steel industry and are expected to get worse. This is especially the case for the European/US steel mills where there is now chronic overcapacity, slowing demand and high steel stock levels. Mills are only working about 75% of their capacity and the continuing uncertainty in Europe may well result in more plants being closed. The Chinese and Indian steel mills are also facing a softening in demand and as a result they now have large stockpiles of coal and iron ore.

These steel industry problems will have a disastrous impact upon the owners of capesize bulk carriers. Analysts at PriceWaterhouseCooper’s believe that there are currently 1,200 ships able to carry cargos of 100,000 tonnes or more of coal or iron ore. Shipowners have unrealistically assumed that the world demand for iron ore will follow the same steep growth that has been seen during the last decade. As a result there are currently estimated to be over 450 capesize bulkers on order at an estimated value of $45 billion. A substantially increased world fleet will be chasing a broadly unchanged demand, with an inevitable drastic fall in freight rates.

This situation will in turn have a likely adverse effect upon world banks as shipowners struggle to keep making the repayments due on loans taken out to finance the capesize fleet. UK banks alone have lent more than $50 billion to finance new ship construction. The bulk shipping industry could be the next sub-prime sector.


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## Island Boatman (Nov 15, 2011)

This reminds me EXACTLY of the type of reports I would write as a shipping consultant at Drewry's in the early 1980's. Plus ca change, plus ca meme chose! We vener learn, do we?


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## Jardine (Oct 29, 2011)

Looming? It arrived about 3 months ago!


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## Jardine (Oct 29, 2011)

The latest figures and predictions from shipbrokers are abysmal. Things are going to get worse with 13k TEUs entering the market obtaining rates which cover opex only. The banks are taking a big hit! God bless 'em


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## Nick Balls (Apr 5, 2008)

On my first trip to sea it was explained to me about the cyclic nature of the shipping industry. This still holds true today and you can trace these massive ups and downs back for many many years. Perversely it's what makes employment sustainable over the longer period. For example how many people with good qualifications got made redundant in the early 1980's? Yet by the late 80's there was a shortage of qualified seafarers. This is just how it is and although I can't recall who it was that told me about this back in 1971 , it stuck with me and I always knew that very soon the bad times would change to good ones . So brace for impact but for those of you still working don't despair !


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## John Dryden (Sep 26, 2009)

Bit of good news,read online today.

The shipping industry has been in the headlines recently as freight rates have plunged, but James Fisher’s specialist expertise is in demand. Last week, Fisher unveiled a new five-year contract with BP Angola to provide export tanker support services off the coast of the West African country. Fisher will operate three anchor handling tugs, which it will charter, and provide diving services for the mooring operations. No financial details have been released but analysts have calculated that the contract is worth $30m (£19m). This means the contract is a good win and consensus earnings forecasts are likely to rise. The shares, which remain a buy, are trading on a December 2012 multiple of 11.3 times, falling to 10.3 in 2013. The prospective yield is 3%. The Sunday Telegraph´s Questor team says buy.


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## fred henderson (Jun 13, 2005)

Things are so bad in the bulk carrier trades that a shipowner is paying a client to charter its ship! Global Maritime Investments needs to reposition its vessel Angelina from South Korea to Northern Europe. GMI will pay commodities trading company Glencore $2,000 per day to carry Glencore's grain in GMI's ship on the basis that Glencore pays for the fuel.


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