The dry bulk shipping sector has been dashed upon the rocks of vessel oversupply and slowing economic growth. Not dry bulk shipping business is grappling with an unprecedented crisis of too many ships and not enough cargoes, says a report in WSJ.
Idled ships are crowding coastlines world-wide as increasingly desperate companies that ship iron ore, coal and other bulk commodities try to weather the industry’s worst downturn in decades.
Shipping brokers estimate 690 dry-bulk ships, or about 7% of the global fleet, currently are sitting idle. Twice that number will likely need to be parked to balance capacity with demand, said George Lazaridis
, head of research and valuations at Athens-based Allied Shipbroking Inc.
The parked vessels are a stark sign of how crumbling Chinese demand for commodities is pummeling the global shipping industry.
The freight rates shipping lines can charge to transport raw materials are at record lows, and several operators have filed for bankruptcy protection or folded outright, brokers say.
The slump is taking a toll on ships’ crews, as well.
The industry has suffered from large capital inflows from private equity players who invested in ships in a bet on sustained demand from emerging markets, particularly China.
Instead, the world's second-largest economy is growing at its slowest pace in 25 years, reducing the need for the coal and iron ore that fuels its manufacturing sector
The Baltic Exchange's main sea freight index .BADI, which tracks rates for ships carrying dry bulk commodities, has lost about 98 percent of its value from a peak of 11,793 points in May 2008, marking the lowest level since records began in 1985.