This is bad, real bad.
Via the U.K’s Daily Mail:
You may wish to know this because, if ever you had an irrational desire to charter one, now would be the time. This time last year, an Aframax tanker capable of carrying 80,000 tons of cargo would cost £31,000 a day ($50,000). Now it is about £3,400 ($5,500)
This is why the chilliest financial winds anywhere in the City of London are to be found blowing through its 400-plus shipping brokers.
Between them, they manage about half of the world’s chartering business. The bonuses are long gone. The last to feel the tail of the economic whiplash, they – and their insurers and lawyers – await a wave of redundancies and business failures in the next six months. Commerce is contracting, fleets rust away – yet new ship-builds ordered years ago are still coming on stream.
Just 12 months ago these financiers and brokers were enjoying fat bonuses as they traded cargo space. But nobody wants the space any more, and those that still need to ship goods across the world are demanding vast reductions in price.
Do not tell these men and women about green shoots of recovery. As Briton Tim Huxley, one of Asia’s leading ship brokers, says, if the world is really pulling itself out of recession, then all these idle ships should be back on the move.
‘This is the time of year when everyone is doing all the Christmas stu ff,’ he points out.
‘A couple of years ago those ships would have been steaming back and forth, going at full speed. But now you’ve got something like 12 per cent of the world’s container ships doing nothing.’
Aframaxes are oil bearers. But the slump is industry-wide. The cost of sending a 40ft steel container of merchandise from China to the UK has fallen from £850 plus fuel charges last
year to £180 this year. The cost of chartering an entire bulk freighter suitable for carrying raw materials has plunged even further, from close to £185,000 ($300,000) last summer to an incredible £6,100 ($10,000) earlier this year.
Business for bulk carriers has picked up slightly in recent months, largely because of China’s rediscovered appetite for raw materials such as iron ore, says Huxley. But this is a small part of international trade, and the prospects for the container ships remain bleak.
Some experts believe the ratio of container ships sitting idle could rise to 25 per cent within two years in an extraordinary downturn that shipping giant Maersk has called a ‘crisis of historic dimensions’. Last month the company reported its first half-year loss in its 105-year history.
Martin Stopford, managing director of Clarksons, London’s biggest ship broker, says container shipping has been hit particularly hard: ‘In 2006 and 2007 trade was growing at 11 per cent. In 2008 it slowed down by 4.7 per cent. This year we think it might go down by as much as eight per cent. If it costs £7,000 a day to put the ship to sea and if you only get £6,000 a day, than you have got a decision to make.
No matter what your politics is; this is truly bad. Living proof that were are in a globalist economy, and when America hurts; the World hurts too. Of course, the American Presidential Administration that caused all this, is long gone. The Clinton Administration. If the Clinton Administration had not used it’s housing commissioner to pressure Freddie Mac and Fannie Mae to produce those high risk, Adjustable rate Mortgages; which ended up being traded as credit swaps on the market; none of this would have ever happened. But it did, and the balloon economy was created, and the World went with it. When the Balloon popped; the rest of the world came down with it.
It is truly sad thing to behold. But there were warnings and they went unheeded. So, now we have this. There are no easy solutions. But it will rebound, it just takes time.
Predictably, Dan blames Obama. Sorry Dan, that is just plain dumb; Much of this was caused by Clinton and his stupid housing policy. It predates Bush and Obama. So, let’s get off the stupid? Okay? 🙄