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"The set of a Hollywood disaster movie": Clarkson's 2009 warning

London: 2008 will almost certainly go down in the history books as a year of records. Capes started the year earning $130,000/day and handymaxes $60,000, according to Clarkson's latest weekly report. But by February, rates were down 40% and earlier warnings on caution looked well-placed. "But the best was yet to come," say the London analysts. "With iron ore prices surging towards $180/tonne and suppliers digging their heels in, there was a rush to build ore stocks. Congestion fanned the flames and in early June the frenzied Cape market surged over $300,000/day.
By September, the financial crisis had deepened, steel mills found themselves building inventory and "the slide turned into a rout," Clarkson says. Capesize earnings dropped to $6,000/day in October and $2,000/day in November, though earnings for the year still remained close to record levels.
Tankers fared better. The marginalisation of single hull tankers generally and specifically, VLCC single hull conversions drove that market to $195,000/day this time a year ago although it fell back to around $50,000 by late January, climbing again thereafter to $170,000/day by July, "easily the best summer of the boom". The result was tanker earnings overall up by nearly 32% over the year.
Some of Clarkson's "2008 At a Glance" statistics look very scary. The total orderbook grew by almost a quarter during 2008, with dry bulk orders boosting shipyards' work-in-hand by more than 34%. Scrap prices fell dramatically from earlier peaks - down from $510 per ldt for tankers at end-2007 to $285 one year later; and from $470 to $270 for bulkers. Virtually no scrapping in the dry sector in 2008 rose by more than 1,000% to 5m dwt. But most frightening of all ... three year Capesize  timecharter rates fell from $105,000/day to just $20,000 over the year; from $48,000 to $13,000 for a Panamax; and from $43,000 to $12,000 for a Handymax.
Clarkson concludes:  "On the demand side the financial crisis has a desperate feel about it. Although we cannot quantify what will happen next, it now feels more like the set of a Hollywood disaster movie." Strong sentiment indeed from the world's largest shipbroker and leading analyst!   [12/01/09]

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