A Wide Lens View
The BDI is improving, coming off its 30-year low of 509 points in mid-February to land at 540 points at the end of the month. But, bulk cargo shipping owners are hurting due to spot earnings covering only between one-third and one-half of their daily costs. The pain is felt even by those whose vessels are paid for, as they still need the capital to protect against negative cash flow. This depression may mean cheaper vessels, but a cash balance that remains at a deficit really has no redeeming features. Tankers are faring a bit better due a more balanced supply and demand ratio, but the improvement has resulted in unnecessary ordering, as well as switching orders from dry to wet cargo tanker vessels.
Approximately 15 years ago, China surpassed Japan as the leading influencer of the international shipping market. Previously, it was Japanese productivity, especially during the 1980s, which spurred growth in the bulk carrier and tanker industry, as Japan imported raw materials not available domestically to build a thriving manufacturing sector. These same container ships and tankers carried Japanese product to ports far and wide, thus cultivating a strong service and delivery-oriented shipping industry, along with a strong employment base. Continue reading