While all the old, rich and powerful keep mumbling about recovery at the end of 2010, I tend not to believe in it. If anything 2010 will be worse than 2009. My opinion may rest in part on the fact that I am not rich, and therefore do not stand to loose my position of power. Mind you, I am well aware that these people will weather the storm better than me, but the thing they built their world upon may be going away for good…
The problem with the economy is that the chain of dominos is rather long and recursive. That means, we saw some banks topple and thought it was the end, but it was only the beginning. Take the following article about the ghost fleet off of the coast of Singapore:
The Aframax-class oil tanker is the camel of the world’s high seas. By definition, it is smaller than 132,000 tons deadweight and with a breadth above 106ft. It is used in the basins of the Black Sea, the North Sea, the Caribbean Sea, the China Sea and the Mediterranean – or anywhere where non-OPEC exporting countries have harbours and canals too small to accommodate very large crude carriers (VLCC) or ultra-large crude carriers (ULCCs). The term is based on the Average Freight Rate Assessment (AFRA) tanker rate system and is an industry standard.
You may wish to know this because, if ever you had an irrational desire to charter one, now would be the time. This time last year, an Aframax tanker capable of carrying 80,000 tons of cargo would cost £31,000 a day ($50,000). Now it is about £3,400 ($5,500).
This is why the chilliest financial winds anywhere in the City of London are to be found blowing through its 400-plus shipping brokers.
Between them, they manage about half of the world’s chartering business. The bonuses are long gone. The last to feel the tail of the economic whiplash, they – and their insurers and lawyers – await a wave of redundancies and business failures in the next six months. Commerce is contracting, fleets rust away – yet new ship-builds ordered years ago are still coming on stream.
Read the rest, it is well worth it. Especially considering there is a lag of three years between ordering a ship and getting it. That means the shipyards are currently busy building ships nobody needs and that might be scrapped on completition.
Now we get to the recursive part in the domino theory. Once the companies that are currently buys building ships nobody needs run out of orders in about two years time, they will close down, laying off their workers, which in turn will deepen the cirsis.
‘know what I’m sayin’ …