Brokers stunned by 'zero dollars per day' deal

Michelle Wiese Bockmann - Thursday 9 October 2008

UNCONFIRMED reports that a panamax was fixed for a voyage that covered bunkers and port costs only stunned London brokers today, as bulk carrier charter rates continued their month-long freefall. 

The fixture, yet to be verified by the Baltic Exchange, was thought to be for a 1981-built panamax coming out of the Middle East Gulf for a journey via the west coast of India, to take a cargo of iron ore to China. 

Although reports denying the deal had taken place were circulated today, brokers continued to point to the fixture being for the Hong Kong-flagged, 61,393 dwt, 1981-built Dong Sheng Ocean. There were also further rumours that a supramax bulk carrier had fixed out of India on similar terms, although brokers could not verify the details of either fixture. 

Market sources stressed that in both cases these vessels were ageing ships and that in their current positions were unlikely to find work. 

This would result in the owners having to cover the costs to ballast to a better position. 

But following a shortage of cargoes out of India to China over the last few months, another broker said he would not be surprised if the fixtures were real, even joking that the owner was lucky to get the bunkers paid. 

He added that even modern panamaxes have been forced to sail in ballast away from India to either Indonesia, South Africa or even South America to find a cargo. 

The deal, if genuine, represents an amazing turnaround for panamax charter rates, which have plunged from over $50,000 per day in late August to languish at just over $16,000 per day. 

The charter arrangement for the elderly vessel represents an effective rate of “zero dollars per day” and plunges the industry back to its darkest times in the early to mid 1980s. 

The market for bulk carriers back then was so dire that newbuildings were being delivered into lay-up, a broker told Lloyd’s List. 

“Back in the mid-1980s, things were desperately bad and zero time charters were done,” said a Baltic Exchange spokesman said. 

The global financial crisis has triggered a massive collapse in confidence in charter rates for the world’s bulk carriers, amid a dearth of cargoes, falling Chinese demand and plunging steel prices. 

The Baltic Dry Index today fell a further 261 points to 2,503, its lowest value since June 2, 2006. 

“What is so stunning is that we have got where we are in such a short period of time,” said one London-based veteran panamax broker. 

“What’s really interesting is what this means for some of the younger shipbrokers who think shipbroking is a licence to print money. Welcome to the real world!” 

Panamax average time charter rates hit a high of nearly $95,000 per day on October 30 last year. But the rate was still as high as $91,000 per day in late May, when China’s record-breaking appetite for iron ore from Brazil and Australia saw demand for bulk carriers outstrip supply. 

Further spooking the shipping market this week was a report that an Australian iron ore producer had received requests from Chinese customers asking for delays in shipments because of slowing demand. 

Mt Gibson, one of the smaller iron ore producers said it had received requests to delay shipments until the second quarter of the financial year. 

There are also reports that the financial paralysis gripping banking and commodities markets has stalled grain shipments. 

 

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