When shipping’s down, lay that ship up
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TEXT OF INTERVIEW
Kai Ryssdal: One of our favorite, if more obscure, economic indicators fell again today. The Baltic Dry Index dropped almost a percent and a half. It’s a pretty reliable indicator of the price of — and so the demand for — shipping dry goods by sea. As the falling Baltic Dry tells you, a lot of the ships that are usually moving all that stuff around the world aren’t anymore. So earlier today we got Chris Sjodoff on the phone from Dubai, over in the U.A.E. He’s with the world-wide ship service company GAC there, and we asked him what you do with all those empty boats.
CHRIS SJODOFF: Basically what you do for a longer term lay-up is that you try to conserve the ship in a very good way, so that it is in good shape, and it comes out into active duty again.
Ryssdal: What does it mean to lay-up a ship? You let the crew go, you shut down the machinery and then you park it some place, I guess, right?
SJODOFF: Yeah, you have different ways of laying up a ship. You have what is called hot ship lay-ups and you have cold ship lay-ups. If you lay-up a ship in a so-called hot lay-up then you maintain the crew. Normally you do that up to 12 months of time. If you go beyond a year, I’d say up to five years, then it’s called a cold lay-up. And then normally you don’t have crew on board. And the longer you lay it up, the longer time it will take you to reactivate a ship after it has been laid up.
Ryssdal: It seems like an extraordinary amount of time to take a capital asset like a ship out of circulation, even 12 months. I mean, that’s just, it’s a huge piece of machinery you’re taking out of the global-trade equation.
SJODOFF: It’s a lot of things to reactivate. Not only the main machine, you have axillary machines. You have a lot of electronics on board. It’s a lot of things. And then you have the cargo holds, you can have cranes on board. It’s quite a massive piece of equipment.
Ryssdal: Well, let’s say you wanted to lay something in Asia. A medium-sized cargo container. How much might that run a company?
SJODOFF: The cost of laying up the ship is one thing. Then you have authorities who take up port charges and such. It’s hard to give a good answer to that. It could be $20 to $40,000 for a 2,000 container ship. Again, it’s very much depending on the location and what type of lay-up you’re going for. It could be more. It could me less.
Ryssdal: When was the last time we saw ships in this quantity being taken out of service?
SJODOFF: Well, last time you had a large number of ships being laid up was in the 70’s. Ships were laid up from 1973 to 1975. Some were taken out of hibernation in 1984, 85, so that was up to 10 years later. This time, with the action from all kinds of elements from around the world, everybody hopes it’s going to go a lot faster than that. And we are shipping agents. We want to see ships trade. We want to take care of ships going in and out of ports around the world. But of course, when things like this happen we have to be there for our clients, and we try to find solutions for these types as well.
Ryssdal: Chris Sjodoff is a vice president with GAC Corporation. They’re a ship-service company. We reached him from Dubai. Mr. Sjodoff, thanks so much for your time.
SJODOFF: Thank you very much.
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