In an email note, Charles de Trenck of research firm Transport Trackers highlights how shipping companies could face substantial write-downs. In a similar fashion to banks right now, some of their assets are being carried on the balance sheet at far higher values than the current market value. So expect their balance sheets to be far worse than they look right now.
Transport Trackers: Brokers have highlighted a new all-time low for container charter rates this week (and the BDI traded back below 4,000...psychology playing its role here both on up and down sides...though some tankers did better this week).
One of our main worries for 2010 is impairments of value on balance sheets for many ship classes delivered in recent years -- once accountants perform their duty-bound functions. Many banks, often European, will face same/similar issues on their loan books as well.
The damage will likely be to containers first, but some bulk will likely also take a hit. ... Another way to slice the distribution of troubles is by geography. In some geographies there are total bailouts, while in others there are few. Japan is getting hard hit at the moment.
Wholesale impairments on B/S have not happened in many decades. In the 80s it was bankruptcies after sometimes long drawn out dramas. ...How will it play out this time? Over the last year the HR index has declined some 74% -- and from peaks the declines are still a bit more.