Shipping Lines Say Tight Credit Cutting World Trade

by Dave

Bloomberg.com: News

Pacific Basin Shipping Ltd., Hong Kong’s biggest dry-bulk carrier, and Precious Shipping Pcl. said demand for moving coal, iron ore and other commodities will fall because banks are guaranteeing fewer loads.

“Letters of credit and the credit lines for trade currently are frozen,” Khalid Hashim, managing director of Precious Shipping, Thailand’s second-largest shipping company, said in Singapore yesterday. “Nothing is moving because the trader doesn’t want to take the risk of putting cargo on the boat and finding that nobody can pay.”

The lack of letters of credit, in which banks guarantee payment for merchandise, could become a “big issue” for world trade, according to Klaus Nyborg, Deputy Chief Executive Officer at Pacific Basin. Tighter credit has contributed to this year’s 80 percent drop in the Baltic Dry Index, a measure of commodity-shipping costs. About 90 percent of world trade moves by sea.

Technorati Tags:

TwitterFriendFeedDeliciousLinkedInFacebookDiggShare