There is now a problem with Zombie Ships trading the oceans.
"Zombie ships set sail
“What is damaging shipping is a zombie fleet, which accepts freight at maverick prices just to keep going,” said Mr Kidwell.
A zombie ship is one that can just about repay interest on its debts, but has no hope of repaying the capital.
The situation might be about to get a lot worse for loans to the shipping industry. The calculation of loan repayments and the rate of interest depend on the historic residual value of the ship at the end of the life of the loan.
Mr Kidwell said that a five-year old Capesize vessel was sold for $19m in recent weeks, 40pc below the normal listing price for a vessel that age of around $33m, and less than half the $48m cost of a new ship. The scrap value of ships has also plummeted as China pumps new steel onto world markets.
[FONT=Roboto]The collapse in prices for secondhand vessels will blow a hole in the balance sheet of any bank or individual that is sitting on those loans."[/FONT]