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From: Paul Kern11/6/2008 9:45:02 PM
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Ship Orders Plunged 90% Last Month on Credit, Trade Slowdown

By Wendy Leung

Nov. 7 (Bloomberg) -- Global ship orders tumbled 90 percent last month as the credit crunch damped world trade and made it harder for shipping lines to borrow money, according to Lloyd's Registers Group.

Shipowners ordered a total of 37 container ships, tankers and other vessels in October, compared with 378 a year earlier, Lloyd's Register Chief Executive Officer Richard Sadler said in an interview yesterday at a conference in Dalian, China.

Hyundai Heavy Industries Co., the world's largest shipyard, has also reported declining orders for the three months through September as shipping lines are slowing expansion plans because of a lack of financing and plunging demand for shipments of oil, raw materials and finished goods. The global full-year order tally will likely fall more than the 15 percent previously predicted by Lloyd's Register, Sadler said.

``We underestimated it,'' he added. ``On the positive side, compared to 2006, 2007 was an exceptional year.''

Contracts last year surged 50 percent to 261.3 million deadweight tonnes, according to Clarkson Plc, the world's largest shipbroker. In the first nine months of this year, orders dropped 27 percent to 142.9 million deadweight ton.

The slowdown means that some shipyards haven't taken an order since the first week of September, Sadler said.

New contracts in China dropped 62 percent to 24.35 million gross tonnes in the first ten months, he added. New orders in Korea fell 50 percent to 33.68 million gross tonnes.

Ship orders surged last year as China's economic growth boosted demand for imports of iron ore, used to make steel. The country's export growth also fueled demand for container ships to carry furniture, toys and other goods to the U.S. and Europe.

The Baltic Dry Index, a measure of commodity-shipping costs, surged to a record 11,793 on May 20, having more than tripled in three years. Rates have since tumbled 93 percent, to near six- year lows, as traders are struggling to get credit for shipments. Chinese steelmakers are also curbing production amid slowing demand for new buildings and cars.

To contact the reporter for this story: Wendy Leung in Hong Kong at wleung12@bloomberg.net
Last Updated: November 6, 2008 21:14 EST

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To: Paul Kern who wrote (60)11/13/2008 8:01:25 AM
From: Lynn
   of 61
 
Leo Lewis, Asia Business Correspondent

They are anchored silently across the straits, stretching as far as the eye can see from Singapore's gleaming skyscrapers, and they are a stark illustration of the worst threat to business that veterans of the shipping industry have ever seen. Ships, immobile on the horizon, going nowhere. For an economy such as Singapore, it is the stuff of nightmares.

According to senior industry figures, the complex network of trade credit that keeps imports and exports rolling through Asia and beyond has evaporated — suddenly — in a haze of mistrust. And as a result, cargoes are sitting on docksides throughout Asia without the letters of credit that would load them on to ships, which, in turn must sit and wait.

As the extent of the crisis has unfolded, the Baltic Dry Index (BDI) of shipping rates for materials such as iron ore and coal has plunged by nearly 90 per cent over the past few weeks. Economists have pointed to the fall as a clear indication that the financial crisis has been passed through to the real economy.

A sales manager at one prominent London shipbroker told The Times that the prospects for container rates over the coming year “look far worse than the bulk rates”. The spectacular crash has been driven in part by falling demand for commodities, but many believe that problems of trade financing will hold prices down until well into 2009.

Khalid Hashim, the chief executive of Precious Shipping and a 30-year veteran of the industry, believes that the collapse in the BDI should be understood principally as an effect of the trade finance crisis. Normally, when a seller and buyer of a commodity conduct a transaction, the seller opens a letter of credit to the buyer, allowing the buyer to ship the goods and en-cash the money. The system breaks down when the letter of credit from the bank is not being honoured, as is the case now.

“This is when trust in the trade evaporates,” Mr Hashim told a recent conference call organised by JPMorgan. “This type of trust in the trade has gone out of the window and people within trade circles have confirmed that major banks are refusing to honour the documents they have issued because they don't have the money.

“Those on the front line of world trade have already experienced this. They know that today, to move cargo, they'd better have a secure instrument for payment, otherwise they will ship the cargoes, lose control of them and not have the money.”

Worst hit, analysts say, will be economies such as Hong Kong, Taiwan and Singapore, which sit at the centre of Asia's production chain and depend on the movement of “processing exports” — components, half-finished goods and raw materials.

That flow, senior executives of Japanese shipping companies argue, could take months to return to something approaching normal.

One leading industry source told investors at a recent conference in Singapore to expect grim times, with a “horror story” set to play out next year as ships ordered several years ago join idle fleets and consumers hold on to their money. “Do you know anyone even thinking about buying a new car or even a flat screen TV? Until you do, the situation in shipping is not going to improve.”

Anecdotal evidence from Yokohama in Japan suggests that commodity price volatility has also played a huge role in the present deadlock: shipments are ordered but in the time it takes to get the vessel to the load port and then to the final destination, the spot price of the goods aboard could have fallen so sharply that the entire journey is loss-making. The impact of the trade financing predicament could be especially severe in China. Processing exports account for 46 per cent of the country's total.

For their part, Singapore wags are saying that if the build-up of idle vessels offshore gets much worse, it will soon be possible to walk across them to Indonesia.

business.timesonline.co.uk

[originally posted here: Message 25169316]

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