Access to credit is the lifeblood of maritime trade and the credit crunch has largely cut off that supply, threatening to weed out weaker shippers and shipyards, as well as hamper global trade. The outlook is worst for the bulk shipping industry, which hauls raw materials such as iron ore, grain and cement. More than 90 percent of the world's traded goods by volume is carried by sea.

Access to credit has been cut off at an inopportune time for the industry, after several years of robust growth in markets like India and China -- accompanied by huge infrastructure investments -- spurred a race to build new ships, creating three-year backlogs on shipyard order books. Orders reached a milestone of 10,000 ships on 1st August 2008. But ordering ships is one thing, paying for them is another.

"There has been a further tightening (in lending conditions) over the summer," Harald Serck-Hanssen, Norwegian bank DnB NOR's ship-financing unit said last month. Some banks had shut their books for the year and the limited shipping lending banking universe was shrinking, he said. Serck-Hanssen spoke before the bloodbath on Wall Street of the past two weeks in which credit conditions have worsened for shippers and shipyards, especially newer or smaller operators.

"Some of the newer shipyards (in South Korea and China) are going to suffer a great disappointment," said Polys Hajioannu, chief executive of bulk shipper Safe Bulkers Inc. "They will not be able to deliver a number of ships. Some smaller shippers will also have trouble getting financing to pay for the ships they ordered," he added. Many of those companies put down a 20 percent deposit for their ships when credit conditions were better, but will have trouble raising the rest, Hajioannu said.

The market turned sour rather quickly. In May, the Baltic Exchange's chief sea freight index for global raw materials hit a lifetime high of 11,793 points on demand in fast-growing developing markets including China and India. The index has plummeted since then due to the financial turmoil on international markets, falling commodity prices and fears that Asian demand will falter. On 2nd October the freight index fell to 2,990 points, nearly 75 percent down from the May high and its lowest level in more than two years.

Despite that decline and the apparent lack of available credit, shipyards have reported few cancellations so far for bulk carriers or other ships.