High Shipping Costs Are Here to Stay Says Bloomberg
By Henry Ren (Bloomberg) Stubbornly high shipping expenses for businesses are getting sealed into contracts for the next 12 months, forcing companies to pass the extra costs on to consumers....
By Naomi Christie
(Bloomberg) — Commodity shipping costs matched a record low set 28 years ago as China’s slowing demand for coal and weaker bookings before the Asian country’s New Year holidays compounded a fleet glut.
The Baltic Dry Index slid 0.9 percent to 554 points, the same level it fell to in July and August of 1986, according to data on Monday from the Baltic Exchange in London. Day rates declined for most ship types monitored.
China’s seaborne coal imports slid 10 percent in 2014, reversing growth of 16 percent the year before, according to Clarkson Plc, the world’s largest shipbroker. The Chinese economy, which buys almost half the world’s coal and ore cargoes, will grow in 2015 at the slowest pace in 25 years, economists’ forecasts compiled by Bloomberg show.
“Demand is growing at a sluggish rate,” Erik Folkeson, an Oslo-based analyst at Swedbank AB, said by phone, adding that demand is being further eroded before New Year holidays in China that start later this month. “Coal first of all, and the data that we’ve seen on Chinese iron ore imports has suggested a slowdown in January.”
Ship owners ordered three-times more dry bulk ships in 2013 than a year earlier in expectation of growing coal demand in China, according to Jeffrey Landsberg, managing director of Commodore Research, a New York-based adviser to ship owners. Those vessels are now being delivered to the market and competing for cargoes, driving rates down.
“Chinese coal imports have fallen dramatically,” he said by phone Monday. “They’re not nearly as high as ship owners expected when those vessels were ordered.”
Copyright 2015 Bloomberg.
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