National Bank of Greece, in its latest report about the shipping industry, said that an aggressive policy regarding ship demolitions and cancellations of new building contracts could allow for a new balance in the shipping market and the return of freight rates to acceptable levels in a relatively short period of time.

The report highlighted the great volatility of the freight market, which affected by the world economical crisis, slumped from the all time highs of June 2008 to 12 year lows by December of 2008. This development came as a result of the drop of international demand for shipping services, with the exception of China, as well as the uncertainty regarding the exceptionally high number of new building deliveries.

According to the report, the size of the global order book for the period 2009-2011 reached an unprecedented 63% of the current global fleet by the end of 2008. Still, during the first quarter of 2009, the market recovered, driven by China’s dynamic increase in demand for raw materials and commodities, which are the main cargoes transported by dry bulk carriers. As a result, freight rates were increased by 600% compared to December 2008 lows, reaching the 4,000 points mark.

NBG said that new building cancellations will reach about 40% of the total order book, which means that 100 million DWT will never reach the water. This, coupled with an estimated 70 million DWT of scrapping of older tonnage, could allow for a gradual recovery of dry bulk usage, close to the ten year average of 87% of available hiring days.

(Sourced from Hellenic Shipping News)