Falling ship values are now wreaking havoc in the shippingworld, and many shippers are starting to breach their bond covenants because ofthe loss of values. With the most recent sales of certain ships coming in atonly $28 million, the value of these shipping vessels have dropped over 70%from their peak this summer, and this is bad news indeed because “most of thedry-bulk companies need to maintain their net-asset values at 130% of theiroutstanding loads,” according to Oppenheimer analyst Scott Burk, an expert onthe dry-bulk industry.
Things have degenerated to the point where there have beenonly 10 reported sales of ships in the dry-bulk market, and “after a longabsence of second-hand vessel sales during the rate decline since the end ofsummer, a couple of modern ships have been sold at prices 50% or more belowprices previously recorded.”
Companies with greater debt have found themselves strugglingagainst the current of an ever-weakening dry-bulk market, and many shippingcompanies have found their statuses changes from “overweight” (good) to“underweight” (bad), and many more have lost their status, having it changed toa “neutral” rating. Diana Shipping, however, was upgraded to “overweight,”mainly due to the fact that they have relatively little debt, and will be thebest candidate for surviving this weak market.
Banks are still trying to work out a deal with somecompanies, but the going is slow, and many companies are looking towardalternate methods of making money, if only to make sure they don’t default ontheir loans and sink even more into debt.
This can spell bad news for a lot of consumers here, becausemost of our goods are now coming from overseas. If this is any indication ofthings to come, we’ll need to start growing our own food again, opening up ourown toy factories and getting us away from the free trade system that hasplunged this country into chaos. If the dry-bulk market is failing, it’s onlygoing to get worse, and we need to start thinking about self-sufficiency, like we have in our domestic auto shippers.
Start stocking up, my friends; this is going to be a bumpyride.
Subscribe