The financial crisis is having real world consequences (via The Economist):

IT IS about as far as you can get from the woes of Wall Street:the mucky business of digging ore out of the ground, shipping it across the oceans and turning it into steel, the feedstock of industry. So the recent slump in raw-material prices and the decline in shipping costs indicate just how far-reaching the consequences of the global financial crisis will be for the real economy.

Since the early summer the price of steel has fallen by 20-70% and the key rate for bulk shipping of commodities is down by more than four-fifths. There are even stories of grain cargoes piling up in ports in the Americas. Their buyers’ letters of credit have not been honoured, because of a lack of confidence in the banks that underwrite them. At least one Australian producer has had the same problem with iron ore shipments to China. And shipowners are having trouble raising finance for new vessels.

There are also reports that goods are piling up at ports because letters of credit are not being honored. Demand for raw materials is falling in China due to the slowdown, but the lack of credit is adding to the problem.

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