May 13, 2008
Oh Ship! No Financing Available
Shipbuilding Torpedoed by Subprime Causes Cost Surge, by Todd Zeranski
“Freight rates have risen as fewer vessels have been delivered. The Baltic Dry Index, a measure of rates, has risen 58 percent in the last year as an index tracking the number of cargo ships under construction has fallen 21 percent in that time.
A year ago, banks would finance as much as 80 percent of an order [to build a ship], with 12- to 15-year loan terms. Now, financing usually doesn’t exceed 65 percent, and terms are 10 years or less. Prices have doubled, with even high-quality credit clients paying about 1 percentage point over LIBOR.”
Here are the weekly charts for the Baltic Dry Index and DryShips (DRYS) … slightly correlated I’d say. Fascinating how everything inter-relates: Benny’s Bank Bailout, Crazy Commodities, Dollar Destruction, Dearth of DryShips, ok, I’ll stop at ‘E’.
May 13th, 2008 at 10:08 pm
piss poor analysis and a lot of book talking. if you look at the figures even 10% of the order book cancelled still leaves you with a glut of new boats and a crash in rates post 2009.
May 13th, 2008 at 11:21 pm
…and the Chinese periodically threaten to build their own ships…