Bulk carrier orders threathened

Around 20% of orders for building new dry bulk shipping vessels may be cancelled in 2009 as the financial crisis is hitting the shipping industry hard, a shipping industry executive told Dow Jones Newswires. “A lot of shipowners gave orders for building ships over the past two to three years and paid say 20% of the cost in advance. Now the price at which they had contracted to buy a ship has come down 60%-70% from two- or three-year ago levels, so banks are unwilling to lend the remaining amount to buy the ship,” said Divay Goel, director and head of operations for Drewry Maritime Services (Asia) Pte Ltd.

Goel said it’s impossible to say whether current ocean freight rates have hit the bottom, as shipowners are willing to run ships below operating costs, since it doesn’t make sense to keep ships idle for long periods of time. Even when a recovery occurs, ocean freight rates may not return to the historic highs reached in mid-2008, as the world ocean fleet is going to see massive additions in 2009, despite the likely cancellations, he said.