Of Surveys and Axe-grinding
We saw some headlines a few weeks ago touting the strength and expected growth of dry bulk carriers: “Dry Bulk Growth Expected”
“Dry bulk trade growth is expected to be sustained at current levels for another six years,” a survey revealed. The report went on to say that record bulk carrier investments translated into fleet growth and would have a positive effect on trade at least through 2011. It was also pointed out that although the impact of tightening credit on investors and shipyards would mean that some of the vessels on order would not deliver on time, and in some cases not at all, supply growth would offset this negative aspect.
“Demand is price-sensitive,” the report went on to say, “with many trades priced out of the market in recent years. Lower rates would bring increased demand for seaborne trade to replace high-cost domestic alternatives.”
But earlier this week we were shown evidence to the contrary. Lower rates, in fact, don’t always bring about increased demand. Three days ago a story originated in London and reported that the collapse of the dry bulk shipping market had caused one of the market’s leading carriers, Ukraine’s Industrial Carriers, Inc., to file for bankruptcy. “Collapse” was the term used in the story to describe the conditions in the dry bulk industry. The story said nothing about strength or growth but as freight rates continue to tumble there is growing concern in the industry that other dry bulk carriers could also go into default. Until rates began to decline in mid-summer, the Marshall Islands-based carrier, headquartered in Odessa, operated its fleet at a profit, but with dramatic freight reductions in recent months, and no relief in sight, the carrier had no alternative but to throw in the towel.
Makes you wonder about surveys and axe-grinding, does it not?
And how about this one? Here’s how we began Vol. XVII, Art. 4: “According to a preliminary analysis completed by a well-known engineering firm, the Jasper County port that South Carolina and Georgia intend to build could generate $ 2.3 billion by the year 2020 …”
“The analysts, of course, were paid to inform the residents (the taxpayers) of Georgia and South Carolina that container volume ‘should’ grow by 6.7 percent annually …”
“Two results were hoped for, and anticipated. The first is that hundreds of millions of dollars would be transferred from the taxpayers to the port authorities, and finally when the taxpayers began to realize that all estimates were just pie-in-the-sky, and that the new terminal was an absolute waste of time and money, well, those caveats were there, weren’t they?”
But there was a third result hoped for and anticipated. Coincidentally, of course, the firm that produced those promising estimates has just been hired as the program manager by the very board members that paid for that firm’s optimistic estimates. Surprised? Don’t be.