Negative shipping rates. At least on specific routes. How does...

Negative shipping rates. At least on specific routes. How does that help Greece?

Quote from Bloomberg report:

" Glencore International Plc (GLEN) hired a commodity ship with the operator of the vessel earning nothing and contributing to some of the fuel costs after freight rates for hauling raw materials had their worst-ever start to a year.

Glencore chartered the vessel, operated by Global Maritime Investments Ltd., a Cyprus-based company with offices in London, at minus $2,000 a day for the first 60 days of the charter, Steve Rodley, GMI's U.K. managing director, said by phone today.

The shipment is Australian grains to Europe and it will put the ship in a better position for its next cargo, he said. "Our other option was to stay in the Pacific and earn poor revenues or ballast to the Atlantic and pay the fuel ourselves," Rodley said.

Ballasting refers to sailing without a cargo. The Baltic Dry Index (BDIY), a measure of commodity shipping costs, advanced 1 point to 648 points today, according to the Baltic Exchange in London. Last month, the gauge plunged 61 percent for its worst start to a year on record."

The BDI index has been mentioned on HC, but here it is.

The idea of 'negative shipping rates' makes sense if you think in terms of positioning the ship in more lucrative location. The shipping business is completely route specific.

The current price plunge is reflective of a major vessel overhang, with ships over-ordered before the 2008 crisis still being delivered to what is now a hugely oversupplied market.

According to ICAP's shipping analysts, operators have finally started to convert or demolish older vessels in an attempt to restore balance to the market:

ICAP also noted, it could be difficult to incentivise operators to scrap or demolish vessels much further, quote:

"So at what level does one predict scrapping for 2012? To answer we have to look to see who has the most to gain and who are those able to. An owner with just modern tonnage has little room to manoeuvre, and owners with just older tonnage are likely sitting on a paid off asset requiring only levels above operating costs to be in the money. Therefore the answer lies with those that have both old and modern tonnage — it is in their interest to remove their older vessels to help revive the supply/demand balance to help lift rates to more profitable levels for their newer vessels."

So this is the backdrop to one of the major industry in which Greece has to compete. However - it doesn't compete with the rest of EU but with global players such as the Chinese. It is a very difficult situation.

Now, I know that you all say that Greece can rely on its tourism. Yes, once the demonstrators stop than visitors may return to Greece. It is true that tourism has hold up very well in the last few years. However on its own - it isn't enough to support the Greek economic revival.

As I have said - Europe needs to support Greece for the next few years.