Action by the ship-owners: negative | Effect: negative | Action: positive | Effect: positive |
T0 order ships on a favorable freight rate, when D > S; time needed for ships’ delivery: from 2 years on | Supply increases upon delivery; a diminishing freight rate appears as a result (ceteris paribus; especially for distances) | They lay-up temporarily unprofitable ships up; time needed to decide to lay ships-up: say = 3 months | Freight rates temporarily improve—slightly—as laid-up ships rise, depending on the gap between supply & demand & distances |
Positive: if the freight rate continues to fall, & the laid-up tonnage is absorbed & the new supply is stopped, recovery then starts | Positive but long term: Scrapping the long-term unprofitable ships (improving also company’s liquidity by the scrap money) restores the D/S balance; but the time needed for this is: say 3 years | Positive: Freight rates begin to rise, because D > S & a boom starts | Positive: The longer the delivery time of the new ships, the longer the boom, if D > S; the faster the scrapping, the shorter the slump |