It is frequently used as an indicator how well international trade is performing. If the price is low, it suggests trade is slowing.
The drop has been so bad that ships are being scrapped faster than they are being built. Analysts at Deutsche Bank led by Amit Mehrotra have been watching the fall closely and made the following notes:
- Total dry bulk capacity declined by almost 1M tons (net) last week as the pace of deliveries slowed and scrapping remained elevated.
- Around 16 ships were sold for scrap last week totaling 1.6M tons. This more than offset 9 new deliveries, translating to a net reduction of 7 vessels.
- Last week’s scrapping would represent an annualized pace of 11% of installed capacity, which is almost double the all-time high of 6.3% set in 1986.
- Year-to-date scrapping is up 80% versus same time last year.
It’s bad news for the industry, as it means that ship owners expect demand for cargo transport to remain weak well into the future.
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