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Shipping Market Cycle Lec3
Shipping Market Cycle Lec3
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Stage 2: Recovery
Recovery is the second stage of the shipping cycle.
In this stage, supply and demand move toward equilibrium,
meaning both supply and demand levels match each other closely.
Freight charges begin to increase, eventually surpassing operating
costs.
Shipping containers begin to move out of the trading ports, as
demand stimulates new orders.
During this stage, optimism about the market remains shaky.
The opinion swings back and forth between optimism and
pessimism, resulting in volatility for trade volume.
Cash flow tends to improve steadily during the recovery stage.
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Stage 3: Peak
Supply = Demand
The shipping cycle's third stage is a peak or plateau.
At this point, the shipping freight rates become quite high ---
often double or triple the amount of fleet operating costs.
The levels of supply and demand are almost completely
equal.
Quite a bit of market pressure occurs between supply and
demand levels, which could cause the peak to fall at any time.
Most of the shipping fleet is in operation, with only the most
inefficient ships left to idle in trading ports.
Cash flow for shipping companies is quite high.
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Stage 4: Collapse
Supply > Demand
Supply levels begin to exceed demand.
Freight rates begin to decline during a collapse.
Shipping containers and fleet begin to accumulate in trading
ports once again.
Ships begin to slow down their operations.
They may take longer to deliver goods, and inefficient fleets
may not ship goods for some time.