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The collapse of the Port of Halifax


This chart describes the collapse of the global shipping industry over the past couple of months. There's nothing that local port officials can do about it. But for a city and province that are betting their futures on port business, shouldn't politicians, business people and reporters be talking about this?

Put simply, the cost of shipping has dropped through the floor. Sending a tonne of iron ore from Brazil to China in early June would have set you back more than $100 (£62) per tonne, or around $15m per voyage. But freight rates have now dropped to only slightly over $10 per tonne, or just $1.5m for the 70-90 day journey.

As if that wasn't dramatic enough, the drop in daily charter rates is even sharper. At the peak of the market, a 170,000-tonne Capesize bulk carrier was hired out at the eye-watering daily rate of $234,000. At the beginning of this week, it was $5,611 – a fall of nearly 98 per cent.

Peter Kerr-Dineen, chairman of Howe Robinson shipbrokers, said: "The scale of change in rate is utterly staggering – the market has come down from super-boom territory to pretty close to bust, effectively in two months."

Contracting demand for imports inrecession-wary economies across the world is a factor, as are steadily falling commodity prices and the mechanics of supply and demand in the shipping industry itself. But the real trouble is less obvious, largely unprecedented, and potentially devastating.

The wheels of international shipping are greased with "letters of credit"issued to buyers of bulk cargo by their banks. These guarantee the value of the shipment once it is in transit but before it is delivered. The problem is that the credit crunch, with the resulting liquidity problems in the international banking sector, is taking its toll on the availability of these entirelyroutine instruments. "We have the hugely worrying and unprecedented development where there are perfectly creditworthy shippers and receivers unable to open perfectly standardletters of credit," Mr Kerr-Dineen said.

Cargos are sitting on docksidesbecause the finance is not available to ship them, with the gravest implications for the future. "This is a nuclear bomb in the freight market, and in world trade," Mr Kerr-Dineen said.

As the article explains, bulk goods are more affected than are manufactured goods, which make up the majority shipments into Halifax, so things aren't entirely bad. But expect big, big drops in port business. The first six months of the year saw a 20 percent decline in port traffic; we can expect that number to be considerably higher for the last six months of the year, and higher still into next year.

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