Worst yet to come for Asian dry bulk companies

Since the drop in demand for raw materials, Asian dry bulk companies have seen shipping rates come crashing down.

The Baltic Dry Index has fallen 93 percent since its peak in May, the Wall Street Journal reported. And even if there were some demand, it is increasingly difficult to secure trade finance, and investors have stopped giving shipping companies any credit for earnings or assets. Even Asia’s largest dry bulk shipping by market capitalisation, China COSCO Holdings is now trading at only 2.5 times expected 2009 earnings, which is half of the expected book value. According to the Wall Street Journal, as recently as August this year, the company was trading at five times earnings and 2.5 times book value. But it seems the worst is yet to come with further decreases in both earnings and book values anticipated when new ships, which were ordered during the shipping boom years, are delivered. DVB Bank figures as quoted by the Wall Street Journal stated that the tonnage of shipping capacity on order, due mainly in the next three years, stands at 72 percent of the existing dry bulk fleet.
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