Today he explains that the bubble bursts

On December 13 in "Les Echos", Philippe Louis-Dreyfus denounced the formation of a bubble in the maritime transport of dry bulk. He considered while the market had reached "an abnormal, unreasonable and unhealthy level". Today, he explains that "the bubble bursts." Considers that goes, "cause a cascade of bankruptcies among shipowners, cargo operators and shipyards.

A few months ago, you préveniez that the balloon would inevitably erupt in the light of the next arrival of a considerable number of ships under construction. Where is it today

The bubble bursts! On the segment of the "capesize" bulk carriers of at least 100,000 tonnes, index Baltic Cape Index, which sets out the average price of Charter on four routes, reached a highest history June 5 with this day is a spot of 233.988 $ value. In other words, if an industrial sought on the spot market a boat for him transport his coal or its iron ore, the present respondent shipowner him invoiced delivery 234.000 dollars a day. At the end of July, the index began to fall and, today, it is 25,000 dollars a day! In the space of four months, the shipowner on the spot market revenue was divided by ten...

But this bubble bursts may not be for the basic reason that I was putting forward, namely excess of future ships. Always on the "capesize" segment, the world fleet is currently 800 ships and 800 others were ordered and should enter service by 2012: it is clear that the application will not follow such doubling of the offer. However, I have the impression that the market became still not sufficiently aware of this overcapacity that threatened because the bulk of the new boats come into service until next year. In other words, when this fundamental criterion will be taken into account, of the "capesize" Charter price to sink even more.

In the meantime, why prices fall

Other factors come into play: the maritime transport of 94 of global goods, traffic is obviously in the front line when economies slow down. There are also of course the impact of the financial crisis. But another factor currently plays a fundamental role: since the end of the Olympic Games, China made pressure on the Brazil to get the discount on the price of iron ore. In this context, Chinese steel producers have decided to cancel contracts with the Brazil. It is as much freight less to carry the "capesize".

What will be the consequences of this crisis for the sector of bulk

The collapse of freight rates will further lead to a cascade of bankruptcies among shipowners, cargo operators and shipyards that bankers are in full the credit crisis. Particular, the situation will be terrible for the shipowners who had placed orders for boats in speculation, at crazy prices. In the light of the new Charter price, these ships will cost them very, very expensive...

How can the market to regulate

One of the beneficial effects of the financial crisis will be the cancellation of orders for vessels, lack of funding. In the "capesize", can be estimated that a boat out of three in command will be finally cancelled. Access to the funding crisis will also kill the ambitions of many virtual shipyards, these Asian yards and Chinese in particular who had obtained command of ships before even exist in the egg. Finally, some old boats continued to navigate when freight rates were at their highest but should they be demolished long finally headed to scrap metal. But I fear that these three regulatory elements are not sufficient to eliminate the excess of supply.

Will the crisis be beneficial for Louis Dreyfus shipowners

Yes! We do we are not only the whistle on the formation of the bubble of the dry bulk, we in have also long drawn the consequences for the group. Convinced that the balloon would inevitably erupt we decided since evil time already to play the market, being "short boats and long contracts. Clearly, we preferred the long-term contracts with industry with a faultless signature, for example, MOSK (Mitsui) or NYK, us committing to provide the future carrying capacity which we do not necessarily today.

What is the mechanism

Imagine that I invoice 50,000 dollars a day a boat to an industrialist, on a delivery of several years. During the formation of the bubble, I earned much less than a competitor who placed his boats on the spot market, but now it is the opposite. And as we have reduced the wing on the fleet, we now can go every month take the boats that are missing on the spot market, and that we will find this time to 25,000 dollars. For a delivery, I remind you, I'm going to charge double. You know, in 160 years our group crossed many economic cycles. It gives us a considerable advantage over new entrants which were precipitated on this job, simply blinded by the formation of the bubble. To paraphrase Nietzsche, the future belongs to those who have a long memory...