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The Consequences Of Over Investment

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The consequences of over-investment appear and the economy starts manifesting over-heating symptoms. New tonnage begins to come into the shipping market when the wider economy has reached its peak. Ship owners are not concerned about this because as far as they have been observing, the prosperity phase is getting better and better so they expect that it will continue on this upward trend. Then the recession hits and shippers become less willing to commit to long term charter parties and take advantage of declining freight rates on the sport market. There is competition as new tonnage enters the declining market between ship owners who try to grab hold of declining fixtures accepting lower freight rates than they had originally anticipated when the decision was made to order new vessels. A downturn in the economy resulted in a decrease in the demand for shipping and tonnage when supply is now inflated. There is a downward trajectory now and as freight rates and asset values decrease shippers hold back in anticipation of a depression and non-shipping banks begin to pull out as they lack the experience of such a volatile market.
Now ship arrive on the market, years after they have been ordered and the process now reversed. Increased supply leads as the demand for shipping decreases freight rates fall. Decreasing freight rates squeeze the cash inflow now as investors begin paying for their new vessels. The shipping market crashes as investors only pay, if they can only the

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