Money News

Credit, economic woes push sea freight to 9-year low

LONDON (Reuters) - The Baltic Exchange’s dry sea freight index for global resources trade sank to a 9-year low on Tuesday, as fears of global recession and tight lines of credit suffocated trade, industry experts said.

The London-based index, which tracks prices for carrying commodities like iron ore, coal, grains and cement on top export routes, fell 12 points to 815, its lowest level since February 1999.

“Until we get some sanity back in the banking system, financial stability, the inter-bank lending rates narrowing, economic life in the world is going to continue to be stifled,” said Nick Collins a director of dry commodities trade at Clarkson PLC ship consultancy in London.

“Nobody is lending, nobody is buying steel -- ArcelorMittal has cut ouput, most of the steel mills in the West are much the same, people arn’t buying cars and that just feeds through,” he said.

Collins said that a lack of trade finance -- crucial letters of credit -- that grease the wheels of commerce were also adversely affecting trade.

“Credit underpins the whole of the business world. There are even ships hanging outside China full of cargo waiting to get the banks’ approval to discharge it,” Collins said drawing on ancecdotal evidence.

The index, used by economists to help predict global growth cycles, is in sight of an all-time low of 554 points struck in July 1986 when bankruptcies plagued the industry.