Asia/Pacific News
Ship Glut, Low Fuel Costs Mean Low Freight Rates Until 2020: Goldman Sachs
Goldman Sachs Thursday said that low bunker prices and a glut of ships will keep shipping freight rates weak for the rest of the decade or longer, Reuters reports.
The US bank noted that in the dry bulk sector the daily charter rate for a capesize vessel has fallen from a high of over $100,000 in 2008 to below $10,000, while the average utilization rate of the dry bulk shipping fleet is set to decline from around 90 percent between 2008 and 2010 to 70 percent over 2015 to 2019.
Goldman stated, "Faced with the risk of leaving vessels idle over long periods, we believe that ship owners will continue to charge low charter rates. This compounds the impact of lower fuel prices, resulting in a period of cheap freight that should last until older vessels have been scrapped in sufficient numbers to balance the market."
It added, "We expect low freight rates to persist at least until the end of the decade."
Goldman says steep declines in Asian shipping rates have kindled fears about slowing trade, because a fall in export orders from Asian countries depresses the demand for ships.
It also pointed out that China's transition from investment to consumption combined with a shift towards locally sourced cleaner energy has led to a sharp deceleration in dry bulk trade.
Goldman says big mining companies will benefit from the low freight rates because they can access new markets, but high cost producers will suffer from greater competition and a declining share of their regional markets.
The news follows Istanbul Freight Index reporting in February a stagnant trend in Black Sea and Mediterranean rates, combined with a sudden weakening of cargo flows.
