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Shipping rates declined

Shipping rates declined
Shipping rates have plunged to a two-year low as the world teeters on the verge of an economic recession, with shipping firms predicting the gloomy outlook will persist as financial turmoil spreads from the US and Europe.

European Union has already started to feel the pinch of the global credit crunch

Shipping rates have plunged to a two-year low as the world teeters on the verge of an economic recession, with shipping firms predicting the gloomy outlook will persist as financial turmoil spreads from the US and Europe.

The Baltic Dry Index (BDI), a measure of commodity-shipping rates, fell 9.4% or 261 points last Thursday to 2,503, the lowest point since June 2006 when the index was 2,478. So far this year, the index has dropped by 73% from the peak of 11,930 points seen four months ago, reflecting the hardships that are foreseeable.

Shipping firms are preparing for the worse, citing the fact that the European Union has already started to feel the pinch of the global credit crunch. Now, Japan is the new victim and by then the Asian economy would inevitably be hurt.

''As the global economy is heading down, export-related activities including shipping business would also feel the impacts,'' said Sumate Tathuwitwanit, managing director of SET-listed Regional Container Line Plc (RCL).

''I think everyone is in the same situation including those who have been secured long-term contracts as demand is weakening and competition arising,'' he added, referring to local competitors including Thoresen Thai Agencies Plc (TTA) and Precious Shipping Plc (PSL).

On Friday, every shipping firm saw its share price nosedive as the main index plunged by almost 10% to a five-year low. TTA shares on the Stock Exchange of Thailand closed at 15.60 baht, losing 16.13%, while PSL shed 1.10 baht or 8.27% to finish at 12.20 baht. RCL lost 90 satang to 9.10 baht, in trade worth 2.66 million baht.

Stock analysts and ship operators say the BDI might decline further over the rest of the year as exports have begun to show signs of slowing down. The lowest BDI was seen in 2005 at 1,747 points.

It is highly likely that Thailand's exports next year will be under pressure from the global economic slowdown, said Chai Chiraseveenupraphan, a market strategist at Capital Nomura Securities.

''November and December are normally the high-season period for overseas shipments. But now in October we have started already to see slowing orders from abroad,'' he said.

Mr Sumate shared the same view, saying the BDI was unlikely to recover over the next few weeks.

''The index is expected to be maintained or drop continuously especially if there is any more negative news in the global financial markets,'' he noted.

Thailand relies heavily on external demand for exports.

Consequently, the kingdom's economy would be adversely affected as two economic powers - the US and Europe - have already suffered.

www.TurkishMaritime.Com.tr

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