Shipping Lines Say Tight Credit Cutting World Trade

[seemslikeadream]

http://www.bloomberg.com/apps/news?pid=20601087&sid=ahkq91XcsKnY&refer=home


Oct. 15 (Bloomberg) -- Pacific Basin Shipping Ltd., Hong Kong's biggest dry-bulk carrier, and Precious Shipping Pcl. said demand for moving coal, iron ore and other commodities will fall because banks are guaranteeing fewer loads.

``Letters of credit and the credit lines for trade currently are frozen,'' Khalid Hashim, managing director of Precious Shipping, Thailand's second-largest shipping company, said in Singapore yesterday. ``Nothing is moving because the trader doesn't want to take the risk of putting cargo on the boat and finding that nobody can pay.''

The lack of letters of credit, in which banks guarantee payment for merchandise, could become a ``big issue'' for world trade, according to Klaus Nyborg, Deputy Chief Executive Officer at Pacific Basin. Tighter credit has contributed to this year's 80 percent drop in the Baltic Dry Index, a measure of commodity-shipping costs. About 90 percent of world trade moves by sea.

``This can have a significant effect on demand because you won't see the same volume of cargo moved,'' Harold L. Malone III, senior vice president at Jefferies & Co., said at a Marine Money conference in Singapore. ``You have to figure out other ways to get trade done.''

The Baltic Dry Index dropped 8.5 percent to 1,809 points yesterday, the lowest since August 2005. Pacific Basin dropped 6.5 percent to HK$4.75 in Hong Kong and Precious Shipping declined 5.5 percent to 12.1 baht in Bangkok.

Vessel Owners

Banks worldwide have curbed lending because of increased concerns about getting their money back. Shipowners are already struggling to obtain funding for new vessels. Precious Shipping took as long as 15 months to secure financing for 18 vessels it has on order, Hashim said.

[Turbineguy]

1. One of the developments needed

is flexible speed engines. In the past container shipping has been based on running at full speed (85-90% engine power). This is because of the economics of mortgages, insurance, depreciation, maintenance and the rest of the mainly fixed expenses. Until recently, fuel was a major cost but the price was such that slowing down only provided marginal savings, if any. The cost break point probably starts at around $400 per ton. Vessels slow down in storms and such but this is temporary. For sustained slow runs you have to change to smaller flow fuel injectors at the very least. Engines and turbochargers are designed to run in a narrow power curve. This could be corrected by shutting down turbochargers (installing valves in exhaust and blower sides). With electronically controlled fuel injection and exhaust valve timing this is starting to be addressed.

For entertainment: http://www.youtube.com/watch?v=7JpIdkehdD0&feature=related