Daily Rates For Biggest Bulk Carriers 2007: $166,377, Today: $5,611 - Fears Grow Re. Food Shipping [View All]

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The growing financial crisis is constraining world trade with a jumbled mess of frozen credit that could mean shortages of food and energy supplies for some countries. Shippers of dry-bulk goods such as grain and coal worry that importers won't be able to pay for the goods they receive. And while some anxious exporters hold on to their goods, rates to ship those goods have plummeted to 10-year lows. Some ship owners are laying up their ships rather than operate at such low rates.

Jefferies & Co. analyst Douglas Mavrinac said while credit markets in general have stabilized somewhat in recent weeks, credit across the shipping industry remains extremely tight. Some companies that buy goods transported by dry-bulk ships, including power plants, steel producers and foodmakers, are not able to secure letters of credit to facilitate shipments of coal, iron ore and grain they need.

Mavrinac said most markets around the world will work through stockpiles of commodities on hand, including coal and grain. But he said food and energy shortages could be a problem in 2009, especially in developing countries, if lending does not ramp up and shipping activity continues to stagnate. "It will take a few months; it's definitely the worst-case scenario," Mavrinac said. "Right now there are plenty of ships, but no cargoes."

Rates for the biggest dry-bulk ships have plunged to an average of just $5,611 per day, compared with $166,377 a year ago. Some companies, however, have secured charter dals with customers that locked in higher rates. "That doesn't imply that global demand is slowing," Mavrinac said. "It implies that global trade is stalling—ships are idling."

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http://www.chicagotribune.com/business/chi-mon-crisis-shipping-1110-nov10,0,725739.story