Cycle 20: (bulk carriers) 1979–87 (the 1980s depression)
The dry cargo freight boom lasted until March 1981 when a sharp fall set in. The daily
earnings of a Panamax fell from $14,000 per day in January to $8,500 per day in
December. The initial trigger for the fall was a US coalminers’ strike which caused a
decline in the Atlantic market.68 The more fundamental problem was the start of a severe
recession in the world economy. Falling oil prices, a stagnant coal trade and elimination
of congestion pushed rates down to levels that by 1983–4 some brokers were describing
as the worst ever experienced.
The following year, 1982, brought a further halving of freight rates. By December
1982 the earnings of a Panamax bulk carrier were down to $4200 per day. In the timecharter
market a great number of time charters negotiated in the previous year had to be
renegotiated to allow the charterers to survive, and many charterers failed to meet their
commitments altogether, which resulted in premature redeliveries and further
difficulties for shipowners.69 Freight rates improved slightly in the spring of 1983, but
fell to the bottom level in the summer and stayed there. Although freight rates were very
depressed, in 1983–4 large numbers of orders were placed for bulk carriers. The whole
process was started by Sanko Steamship, a Japanese shipping company, which secretly
placed orders for 120 ships. Their example was soon followed by a flood of orders from
international shipowners, particularly Greeks and Norwegians. The explanation of this
counter-cyclical ordering, which resembles a similar event in 1905–6, is complex.
Shipowners had accumulated large cash reserves during the 1980 boom; banks,
which had large deposits of petrodollars, were keen to lend to shipping; and ships were
cheap because the shipyards still had overcapacity and no tankers were being ordered.
In addition, the shipyards were offering a new generation of fuel-efficient bulk carriers
which looked very attractive at the prevailing high oil price. The yen was favourable,
making ships ordered in Japan look cheap. Finally, owners ordering in 1983 expected
the cycle to last 6 years as its predecessor had done, so they would take delivery in the
next cyclical upswing which on that calculation was due in 1985.
If so many owners had not had the same idea, this would have been a successful
strategy. Expectations that trade would improve were fulfilled. In 1984 the business
cycle turned up and there was a considerable increase in world trade. However, the
combination of heavy deliveries of bulk carrier newbuildings, many ordered speculatively
in the previous two years, and the fact that the combined carrier fleet could find