Shipping Rates Seen Falling 50% on China, Fleet Size

(Bloomberg) -- Just as global trade starts to recover, the shipping market is crashing for the second time in a year as China reduces raw-material imports and record numbers of new vessels set sail.

The rate for leasing capesize ships, boats three times the size of the Statue of Liberty, will drop about 50 percent from the current price of $37,865 a day to as low as $18,000 before the end of the year, according to the median in a Bloomberg survey of six analysts and fund managers. Forward freight agreements traded by brokers show the fourth-quarter average price will be 7 percent lower.

http://www.bloomberg.com/apps/news?pid=20601102&sid=ax4RVuref7vQ

for an industry with such vessel order-delivery latency. What is strange sometimes is how price drives changes. When container freight rates collapsed, more commodities became containerized (stuff like cement!) . This in turn drove a boom in large container ship building. The economy of scale kept rates down to be able to continue profitable carriage of low revenue commodities. Large-engine technology improvements increase efficiency.

For example, in the late 1990's I went from a 1,450 TEU Containership (1973 built) burning 140 tons of fuel per day to a 4,500 TEU ship (1996 built) burning 140 tons per day. Now we have 13,000 TEU ships burning 250 tons per day.

http://www.emma-maersk.com/

http://people.bath.ac.uk/ccsshb/12cyl/