Ship owners have long memories

Implications: Bulk freight rates slumped to uneconomic lows in the second half of 2001. Typical rates for Cape Size vessels from South Africa to Europe fell to US$4.5/te, and from Australia to Europe to US$6.60/te. For Panamax vessels Australia to Europe fell to US$9.25/te and from South Africa to Europe US$6.5/te. The growth in world bulk freight particularly in the far east has bouyed demand and saved the day for ship owners

Analysis: Ship owners will try to ensure rates never fall to such unsustainable levels again, and will therefore be very prudent in raising capacity. look at the effect of shipping costs in the European CIF (carriage, insurance and freight) coal price that recently passed US$100/te for 25.1GJ/te having languished in the US$30/te to US$50/te range between 1991 and 2003. The demand for coal in China, India and the Far East is only part of the reason for burgeoning international coal prices. Shipping costs are a big part of the increase. Demand for coal in Europe is likely to remain firm, and therefore shipping rates will remain firm as ship building capacity concentrates on higher value construction of cruise liners, LNG carriers and double hulled bulk liquid carriers.