Shipbuilding Orders Evaporate As Baltic Dry Collapses

The Baltic Dry is down 14 days in a row at $1002 – its lowest in 8 months (and worst start to a year on record)

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Shipbuilding Orders Evaporate As Baltic Dry Collapses (Zerohedge, April 11, 2014):

The silence is deafening still about the ongoing collapse in the Baltic Dry Index among mainstream media types (as it just might challenge the hope/hype that growth is coming back). At the dismal level of 1002, BDIY is at 8-month lows and has fallen 14 days in a row… but now it is having a real world impact. As Sea News reports, Korean shipping companies are failing to place orders for large vessels and anxiety over the future is forcing some local companies to dispose of their assets despite the relatively low shipbuilding costs as of late.

And As Sea News reports,

Korean shipping companies are failing to place orders for large vessels. Under the circumstances, the domestic shipping industry is expected to get more and more enervated, because major shipbuilding contracts are an effective means for tiding over a slump in the sector. Some of the local companies are even disposing of their assets despite the relatively low shipbuilding costs as of late.

It seems Korea is particularly hard hit since its government won’t subsidize the losing proposition like Denmark and China is willing to…Industry insiders attribute the current situation to the local shipping finance system. An increasing number of governments, such as the Danish and Chinese governments, have provided large-scale funds for the industry in the form of direct loan and payment guarantees since the outbreak of the recent global financial crisis. CMA-CGM, for instance, returned as the world’s third-largest shipping company thanks to US$150 million from the French government.

In contrast, the Korean government is providing little shipping finance support. “The establishment of the Shipping Finance Corporation has been foundered and the foundation of the Shipping Guarantee Fund, one of its alternatives, is showing little progress for now,” said Senior Analyst Song Min-joon at the Korea Investors Service.

“Our competitors are likely to be steps ahead from late this year, when the vessels will begin to be delivered one after another,” the Korea Shipowners Associations added, continuing, “Then, Korea’s shipping industry will be facing even greater difficulties, unless there are some measures to turn the tables.”

We are sure the fact that the industry has been overbuilt – based on Keynesian-policy-inspired mal-investment and mispriced signals from global markets – will be used as the excuse for the collapsing price of shiiping dry bulk… but that argument s entirely circular and fallacious as it merely reinfoces the unintended consequences of the oh so visible hand in the world’s markets and leaves more zombie entities clogging up any potential economic growth that is possible in a world of peak debt.

4 thoughts on “Shipbuilding Orders Evaporate As Baltic Dry Collapses

  1. The implosion of the world economy is finally upon us. Skyrocketing prices of essentials such as food, water, energy, shelter are already making a harsh reality even more painful for millions. Hunger every month affects 20% of the US economy while congress cuts the value of food stamps. Over 48 million are now on food stamps, and people are not interested in buying junk from Korea, China, India, or anyplace else. The psychology it is going to get worse is taking hold…..and people are squeezing their money tightly……..such a trend not seen since the Great Depression.
    China has been underwriting some companies, but they are pulling in their horns, allowing bonds and companies offering them no protection from bankruptcy. For the first time, China isn’t covering the companies they helped set up. Reason: China is in trouble, too, they relied far too much on exports (now dwindling sharply) and foreign markets. They have been caught overstating their exports many times over the past year or so……they are in deep trouble. The only people making money are the ones eating from government contracts…..rather like the US. But, even those are dying off. One can only build so many ghost towns no citizen can afford to live in before the reality begins to impinge.
    China banked on exports to show phenomenal growth, but after the US tanked, they looked to the EU. Now that the EU is cutting back, the problem is getting too big to hide. They count their GDP on what they build, not earnings. Now, everyone knows, and they are in trouble, too.
    I am not surprised shipping is affected. Used to be China would come over here with loaded ships and return empty. Now, nobody is buying, because the fear has become global.
    The US dollar is losing value, and everywhere, the financial system is so corrupt that nobody believes anything the stock market says any longer. The rigged system is in deadlock. Only 15% of it is made up of real investors, and of those, we don’t know how many are playing on margin. 85% is skim and sell plundering.
    The hens have finally come home to roost, and it isn’t pleasant. The printing press game is about over because nobody is buying US debt any longer, and the same problems are plaguing the IMF and ECB.
    You can only print money for so long before reality regains control. It appears that day is upon us.
    Soon, today’s hell will be remembered as the good old days……..this time, the low level greedy guts will get burned the worst. Right now, they think they are okay because they only refer to US media. For them, it will be a real shock, because they were too lazy to investigate what is happening in the rest of the world. We are really stuck in a global hell now…….
    Great article.

  2. Maersk Line, aka A.P. Moller of Denmark, owners of probably the largest fleet of freighters, tankers & container ships, (you know…the blue ships like Captain Phillips’) have just increased the number of massive container ships built in the 2006/7 era, by adding six even bigger ones just last year.
    Each one capable of carrying over 18.000 20ft long containers.
    I find it hard to believe the writing wasn’t on the wall when they ordered them.
    They are big enough to be limited in port access thus restricting the number of places they can visit, but that is shipping logistics, they use the feeder system, as I just discovered with my stuff coming from the States via Rotterdam & Felixtowe, when I was told it would be Miami – Liverpool.
    Perhaps they know something we don’t.

  3. Squodgy, perhaps they were given the coming plight of the US…….the difficulties they are going to have getting their stuff out of the middle east……..
    Such ships can be used to carry many things……….opportunities are endless.

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