Page 19: of Maritime Reporter Magazine (October 1998)

MARINE FINANCE

Double lummy 01 Reduced Doles, Newbuild Prices leave Owners On The topes

The double whammy effect of the Asian cri- sis by way of reduced rates and newbuilding prices has left most of the dry bulk shipping community more exposed in this segment than they would have imagined only six months ago.

The average bulk newbuilding price has fall- en 20 percent. The average value of second hand bulkers has fallen more than 30 percent since the third quarter of 1997. If the average bulker owner had about 50 percent of equity before the Asian turmoil started, he would, by now, be down to under 30 percent.

With this decimated net asset value, no doubt many of the 150 new shipping banks will start the autumn session carefully reading the minimum value clauses on their loan agree- ments.

Quite likely some of these banks may find that shipping was not that attractive anyway and will foreclose on loan agreements starting forced sales of dry bulk carriers.

With most owners presently being overex- posed to the dry bulk market, the stock market and the bond market having dried up, there will be a limited number of buyers for such ton- nage resulting in further value erosion.

In 1992, the contraction in the shipping mar- ket was in the tanker sector. At that time 10- year old Aframaxes were sold by the banks for $10 to $12 million (appreciating thereafter by 60 percent within two years).

Presently, scrapping of bulkers is equal to

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This may imply that an upturn can be closer than most participants expect. — (R.S. Platou Shipbrokers A.S.)

New Orders of Bulk Carriers (mill, dwt) (1996-1998 Quarterly) source: R.S. Platou Shipbrokers A.S.

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New Orders of Tankers (mill, dwt) (1996-1998 Quarterly) source: R.S. Platou Shipbrokers A.S. ...And As Free-Moving

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