(The coastal index is based on the average freight rates for five routes, ECUK/N. Spain, ECUK/ARAG, Lower Baltic/ARAG, French Bay/ECUK and WCUK/East Med in 3000/4000 mts size and bunker prices basis MGO delivery ARAG range)

Kind regards,
Mark Harrison

H.C. Shipping & Chartering Ltd, Hull
Tel : +44 (0)1482 586760
Fax : +44 (0)1482 590759
E-MAIL: chartering@hcshipping.com
WEB: www.hcshipping.com

THIS REPORT IS PROVIDED FOR GUIDANCE ONLY AND WITHOUT GUARANTEE AS TO COMPLETENESS OR ACCURACY. NO RESPONSIBILITY OR LIABILITY IS ACCEPTED FOR ERRORS OR OMISSIONS. ANY DISSEMINATION, COPYING OR USE OF THIS MESSAGE IS STRICTLY FORBIDDEN, AS IS THE DISCLOSURE OF THE INFORMATION THEREIN.

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Short Sea Market Report w/e 02.01.09

So that was 2008. It’s been a year that could arguably be described as memorable but perhaps not necessarily for the right reasons. As is always the case at this time of year, overall market activity is disrupted by the holidays and unrepresentative of normal trading conditions to such an extent that there is no real value in writing a weekly report. A brief summary of the Christmas period 2008 would be; virtually non existent demand coupled with an abundant supply of spot tonnage = a very weak market.

2008, to coin a footballing cliché, has been a game of two halves or more precisely a game of three quarters and a quarter. It all started strongly. At the beginning of January 2008 our Coastal Index stood at around 17.73, over 35% higher than it had been at the start of 2007 (13.06) and after a steady start the market continued to pick up gradually to end the first quarter showing a modest gain at 18.53.

This trend continued into the second quarter and the pattern overall was fairly unremarkable in terms of volatility. If anything the main difference was simply the increase in freight levels in comparison to the previous year and they remained somewhere in the region of 30-35% higher even approaching the traditional Summer lull. This also coincided with significantly higher fuel prices which had been steadily rising for about 12 months and finally peaked in early July 2008 at approximately USD 1300 basis gasoil for ARAG delivery. To put it into some kind of perspective this was just over 100% higher than a year earlier and the impact of those extreme bunker costs cannot be underestimated in terms of their underpinning the comparatively high market level at that time.

And so into third quarter and the Summer holidays. Given the seasonal nature of the Short Sea Market a dip in demand around July/August would be entirely expected and 2008 was no exception in this respect. As a consequence rate levels also started to soften and again there was really nothing remarkable to report except for the fact that this process was unusually restrained. Rate levels remained comparatively high for the time of year and on the back of that it is fair to say that initial expectations were for a very strong final quarter. It was only by around mid September in the absence of any noticeable upturn and coupled with the first real signs of the impending financial crisis that the prospects for the “normal” Autumn/Winter improvement started to look decidedly wobbly.

The rest, as they say, is history. Cue Q4, cue global financial meltdown and an unprecedented Winter slump. The annual seasonal trend in the Short Sea Market is traditionally so reliable you could almost set your watch by it, so to say it was extraordinary to see rates falling through October/November/December is somewhat understating the case and it was the speed and extent to which everything started to unravel that really shocked. At first everyone though perhaps it was a just a temporary blip but in a relatively short space of time it became apparent that these were exceptional circumstances and the final quarter of 2008 has seen nothing but an unparalleled descent.

So that was 2008. The index closed the year about 33% lower than where it began. Bunker prices have fallen back about 65% from their mid-summer peak. Sterling is so weak it is now every close to parity with the Euro which ordinarily might be described as astonishing but against a back drop of one astonishing event after another somehow doesn’t seem that surprising at all. A glance at the graph below should underline 2008’s exceptional status. Uncertainty has been the operative word over the last few months and it remains so now. There is a hope that the New Year will bring an improvement but for the time being hope is all it is. There is absolutely no evidence to suggest that demand is about to suddenly pick up so whatever happens further down the line the first few weeks of 2009 are likely to be as subdued and uncertain as the ones that preceded them.

Happy New Year.

(The coastal index is based on the average freight rates for five routes, ECUK/N. Spain, ECUK/ARAG, Lower Baltic/ARAG, French Bay/ECUK and WCUK/East Med in 3000/4000 mts size and bunker prices basis MGO delivery ARAG range)

Kind regards,

Mark Harrison

H.C. Shipping & Chartering Ltd, Hull
Tel : +44 (0)1482 586760
Fax : +44 (0)1482 590759
E-MAIL: chartering@hcshipping.com
WEB: www.hcshipping.com

THIS REPORT IS PROVIDED FOR GUIDANCE ONLY AND WITHOUT GUARANTEE AS TO COMPLETENESS OR ACCURACY. NO RESPONSIBILITY OR LIABILITY IS ACCEPTED FOR ERRORS OR OMISSIONS. ANY DISSEMINATION, COPYING OR USE OF THIS MESSAGE IS STRICTLY FORBIDDEN, AS IS THE DISCLOSURE OF THE INFORMATION THEREIN.