A friend calls from Athens this morning moaning and groaning about the sorry state of the shipping industry. I ask, "What's new that makes you so grumpy?" He points me to this story concerning the bankruptcy of a Korean shipping company called Korean Lines ("KL") .
My friend made the following points on this development:
- KL owns about 30 ships and manages another 120. As a result of the chapter filing almost all of these ships are coming back onto the spot market. The KL financial status was known by many insiders (bankers/brokers/shippers). This was a contributing factor in the big run off of the Baltic Dry index recently.
- Spot shipping rates have nowhere to go but down as a result.
- The Chinese ship construction schedule will bring many new ships into service this year. This will depress rates further. Cargo ship asset values are falling.
- Some banks will take big losses. Other shipping companies like KL are now on the edge.
- The dry bulk cargo industry has crossed (once again) from boom to bust.
This is just one man's opinion. He happens to own a dozen vessels.
By. Bruce Krasting
I worked on Wall Street for twenty five years. I was an FX trader during the early days of the 'snake' and the EMS. Derivatives… More