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TROUGH- CHARACTERISTICS
1. There will be evidence of surplus of shipping capacity (supply)
ships queue up at loading points
vessels at sea slow steam to save fuel and delay arrival
2. Freight rates fall to the operating cost of the least efficient ships in the fleet which
move into lay-up
3.
Sustained low freight rates and tight credit create a negative net cash flow which
which becomes progressively greater
shipping companies short of cash are forced to sell ships at distress prices, since
there are few buyers
the price of old ships fall to scrap value, leading to active demolition market
RECOVERY
As supply and demand move towards a balance the first sign of a recovery is
PEAK
COLLAPSE
When supply overtakes demand the market moves in a collapse phase
Spot ships build up in key port
Freight rates fall
Ships reduce operating speed and the least attractive ships have to wait for cargo
Liquidity remains high
Sentiment is confused, changing with each rally in rate