As China slows, so too does demand for container ships to haul iron ore, coal and other kinds of cargo that keep economies moving. With economies not moving too swiftly and a glut of these ships, the global maritime industry is in trouble.
There is a global glut of container ships like this one.
The Baltic Dry Index, an indicator of freight rates for container ships, dropped 16% on the year, averaging 809 during the April-September period. The index uses 1985 as a baseline of 1,000. This was the second-lowest fiscal first-half figure since 1986, when the index dropped to 650. In February, the index even hit a record low - 509.
The index has been moving at "historic lows" since the beginning of the year, a representative of a major maritime shipper said.
Japan's Daiichi Chuo Kisen Kaisha, a midsize shipping company, on Tuesday filed a petition to begin civil rehabilitation proceedings. The company has long depended on its container shipping operations.
Freight rates are now so low that maritime companies have difficulty making a profit by operating container ships, said Yasumi Kudo, chairman at the Japanese Shipowners' Association. Kudo is also chairman of Nippon Yusen.
Nippon Yusen and other big shippers also operate tankers, liquefied natural gas carriers and auto shipping vessels. But if the current situation continues, Kudo said, more companies will suffer financial difficulties.
Operating capesize vessels, the largest class of dry cargo boat, has become especially problematic. Chartering one averaged about $8,200 a day during the April-September period, down 33% on the year. With Chinese demand falling, there is little need for these behemoths, which must go around capes rather than through canals.
China-bound iron ore shipments account for more than 60% of the global total. The country's iron ore imports for August fell 1% from a year earlier; they also logged a year-on-year decline of 1.6% for the April-August period.
Demand for ships to carry iron ore usually increases during the October-December period. However, chartering a vessel for this purpose currently costs $13,000 or so, well below the maritime industryís profitability threshold of $20,000 to $25,000.
It is uncertain how much this rate
might rise during the peak season.
Source: Nikkei Asian Review
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