Shipping markets and commodities in the financial crisis

Implications: The sharp correction in the commodities markets is tipping the supply/ demand balance in favor of the buyers.  The buyers are now in a position to pick and choose.  They now have far more room than previously to manage their supply chain logistics. Commodities exporting nations like Russia and Brazil are now facing the music. 

Analysis: For past five years, the demands in emerging markets for commodities like oil, coal and iron ore have outpaced supply.  The primary issue was to secure supply for production.  This took precedent over other matters like price and delivery costs.

With slackening demand in the current economic downdurn, supply is now exceeding demand.  This is changing the structure of the supply chain relations. 

Matters such as price and delivery cost have come to fore as buyers now have a choice of alternatives.  The commodities sellers can no longer impose their terms in the market.

For shipping, this is a negative development because it means fewer shipments and shorter distances.  Both freight rates and utilization is dropping.

The container ships were the first to be affected.  Now the bulk carriers are also under pressure.