The dry bulk shipping industry will face more pressure in the coming months as owners struggle with a growing glut of vessels and a global economic slowdown, a top ship industry official said on Wednesday.
'The situation is very difficult and quite serious,' said Spyros Polemis, chairman of the International Chamber of Shipping (ICS), whose association represents more than 80 per cent of the world's merchant fleet.
'In terms of the oversupply, there are too many ships for fewer cargoes, because obviously the demand has reduced because of the financial crisis, which is quite deep and it is spread all over the world,' he told Reuters in an interview.
In recent days the Baltic Exchange's main sea freight index, which gauges the cost of shipping commodities including iron ore, coal and grain, has rallied to its highest in nearly nine months, helped by firm Chinese iron ore demand and coal imports to Japan.
It has remained erratic, however, and is still over 35 per cent down from the same period last year.
Analysts expect the sheer weight of ships ordered before the 2008 financial turmoil, which have hit the water in significant numbers this year, to push prospects for a recovery to 2012 at the earliest.
'The pressures are tremendous on companies to survive because companies have invested heavily especially in new ships at quite expensive prices,' Mr Polemis said on the sidelines of an ICS shipping conference in London.
'There have been renegotiations, but the load is heavy and there will be problems faced by the companies.'
The tougher climate has hit the sector hard this year, and confidence is at a record low. Korea Line, South Korea's debt-stricken second-largest dry bulk shipping line, is among the casualties. The firm, under court receivership, has filed a restructuring plan to the court.
The developed world's economies have become ensnared in a growth slowdown that threatens to turn into recession, at a time when room for manoeuvre with bold policy responses has narrowed significantly, Reuters polls show.
In recent weeks China Cosco Holdings, China's top maritime conglomerate, angered many in the shipping sector by halting payments for vessels it had chartered so it could renegotiate better terms on lease contracts it had signed during the rate peak in 2008.
While Cosco has resolved lease disputes with some of the vessels, with more to be reached soon, the issue has added to freight market woes.
Dry bulk ship owner Seanergy Maritime Holdings Corp told Reuters earlier this month it would avoid long-term contracts with charterers such as Cosco.
'Cosco is a very large company,' Mr Polemis said. 'That does not bode well for other charterers, who may be under pressure to let ships go from their time charters. It certainly does not give a good signal.'
'It goes back to pressure that companies are under - that includes Cosco.'