Global shipping rates are primed for a wrenching 74 per cent plunge in 2009 as commodity demand continues to fall in Asia and the massive glut of vessels ordered during the boom years finally hits the oceans.
‘The expected collapse in rates, which could push dozens of shipowners close to bankruptcy, follows a 92 per cent decline in the Baltic Dry Index (BDI) of shipping rates over the course of last year. The misery is expected to continue well into 2010, with a further 15 per cent drop in rates before any rebound brings relief to fleet owners.The closely-watched gauge of world trade in iron ore, coal and other bulk cargoes has fallen for 19 straight days – the same ferocity of decline that followed the collapse of Lehman Brothers and the catastrophic freezing of trade finance.The stark warning of a continuing collapse in the BDI, issued by analysts at Nomura Securities in Hong Kong, comes despite industry predictions of multiple order cancellations by shipowners and forecasts that record numbers of vessels may be put into storage. According to the gloomiest forecasts, fleet owners may lay-up the greatest number of ships since the oil crisis of the 1970s.But these measures, however drastic, may not be enough to fight further alarming declines in freight rates. Even if 40 per cent of worldwide order books are cancelled this year, the slump in global demand and the sharp rise in Chinese inventories of iron ore and coal, say analysts, suggest that the worst is yet to come.