The shipping industry has historically been cyclical, experiencing significant volatility in vessel values, freight rates and shareholder returns.
* By George Markou, Manager, Audit Services
The shipping industry has historically been cyclical, experiencing significant volatility in vessel values, freight rates and shareholder returns. Shipping industry reached its peak in May 2008 when the Baltic Dry Index hit its highest point close to 11,800 points. Most recently, in February 2016, the Baltic Dry Index hit its lowest point close to 300 points. At that point, a bulk carrier regardless of its size, age and fuel efficient qualities earned a very low daily time charter rate. As a result, the operating expenses for many of the shipping companies remain higher than that of revenues resulting in operating losses and liquidity issues, despite the fact that the average price of crude oil declined by 47% in 2015 and early 2016 (USD 52.6 /bbs) compared to that of 2014 (USD 99.4/bbs).
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