Bulker rates fall amid trade credit fears

Michelle Wiese Bockmann - Wednesday 15 October 2008

Panamax average time charter rates were down just over $1,000 per day. Panamax average time charter rates were down just over $1,000 per day.
FEARS that “frozen” lines of trade credit are restricting shipments of dry bulk commodities saw charter rates for bulk carriers collapse further today.
 
Brazil, Argentina, Russia and Bangladesh are among countries where there have been difficulties reported financing shipments, mostly for high-value cargoes such as grain or steel products. 

About 90% of the world’s $14trn in international trade is handled via trade credit, a trade official told Lloyd’s List. 

But the financial crisis has seen the cost to access to trade finance rapidly rise, amid concerns about some of the banks endorsing letters of credit. 

Gobal trade continued to “operate smoothly”, the trade official stressed. 

“I don’t hear of problems in one specific part in the world, I hear of cases here and there of real tightness (accessing credit). We cannot say that nothing is going on, we are at the end of a chain of a short-term, strained money market. 

“But trade is taking place every day, we don’t have any countries saying that they are not in a position to export their main commodity at the moment.” 

A World Trade Organisation task force will meet on November 12, including state-run export credit and insurance agencies, and regional development banks to assess the impact on trade flows. 

Precious Shipping’s managing director Khalid Hashim told a conference in Singapore that letters of credit and credit lines for trade were “frozen”. 

“Nothing is moving because the trader doesn’t want to take the risk of putting cargo on the boat and finding that nobody can pay,” he said. 

Difficulties securing letters of credit, in which banks guarantee payment for merchandise, could become a “big issue’’ for world trade, Klaus Nyborg, deputy chief executive officer at Pacific Basin also said. 

The London-based Grains and Feed Trade Assocation, which represents grain traders worldwide, said problems accessing trade credit had seen isolated cargoes temporarily stranded in Canada and South America.
 
“Getting members to comment on this issue is very difficult,” a spokeswoman said. 

“I just don’t think anybody out there is willing to discuss anything about this financial turmoil.”
GAFTA’s president, Pedro Palomo, did not return calls seeking further comment. 

Major grain and commodities traders including Louis Dreyfus and Cargill also did not respond to requests for comment. 

Other ship operators and charterers said there were many reasons for some shipment delays. Some traders were waiting for commodities prices to fall, said one operator, who declined to be identified. 

The dearth of cargoes continues to rapidly push down the cost to charter bulk carriers. 

Capesize average time charter rates fell nearly 28% yesterday to reach $13,070 per day. This compares with nearly $39,000 per day on October 1, and the record $233,988 per day paid less than five months ago on May 5. 

Panamax average time charter rates were 10,549 per day, down just over $1,000 per day.
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