Newsroom Blog
AT the end of the first quarter of the year, it is perhaps good to pause for a moment and consider where the shipping industry stands, particularly in such uncertain economic times.
As the credit cruch bit last August, we were all told that we would have to wait until the end of the year for the smoke to clear and gain a good perspective on the future economic landscape. That time horizon was later pushed out to the end of the first quarter as the problems became steadily more accute.
Could perhaps the dramatic new write-downs from Swiss bank giant UBS this week come to mark an end to this period of uncertainty?
Bank stocks jumped on the news, believing that the worst may now be over for the embattled financial sector. Damage has been done, but some much needed stability may be returning.
Also this week, an Australian government economist forecast that surging demand for raw commodities such as iron ore from China would continue to stoke the country’s economic expansion. No fears of a global economic slowdown hitting the Autralian export trades so vital to the dry bulk shipping market then.
There are even reasons to be cheerful in the liner shipping sector, which is most vulnerable to rapid swings in US consumer spending. First of all, results from many firms were strong in 2007 giving them some financial muscle to survive any recession. Further, more voices are now saying that the fears of a US economic meltdown have been overdone. A recession there may be, but a 1930s-style depression? Highly unlikely.
Regardless of the economics of world trade, the strength of individual companies often comes down to the size of their reserves to battle through the tough times. And with the cash being thrown off by most shipping operations in recent years, that will provide good insulation.
In business, as in life, it is always dangerous to underestimate the challenges posed by problems that take time to become completely clear. But as we enter the second quarter of 2008, shipping can feel that it is set fair.
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