AuthorTopic: Official Shipping Collapse Thread  (Read 9618 times)

Offline RE

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Official Shipping Collapse Thread
« on: April 02, 2013, 04:43:35 PM »
Kicking off  with the latest collapse in Oil Tanker shipping costs, from ZH

RE

Oil Tanker Market In "State Of Panic" As Charter Rates Plunge, Cargoes Rejected


Submitted by Tyler Durden on 04/02/2013 19:02 -0400
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    While everyone knows about the epic oversupply of dry bulk containerships as a result of the pre-bubble surge in charter rates (and subsequent collapse), which sent many shipping companies to an early bankruptcy or outright liquidation and also resulted in very depressed shipping rates for the last several years as the supply overhang continues to be cleared out of the system (coupled with still depressed end-demand for "dry" commodities) , few may be aware that in the past several months the same fate has befallen the oil-tanker industry. As Bloomberg reports, John Fredriksen's oil-tanker behemoth Frontline Ltd., said it’s rejecting some cargoes after a rout in rates for the vessels. "Frontline is offering tankers for charters “selectively” and the market is in a “state of panic” as excess ship supply drives down charter costs, Jens Martin Jensen, chief executive officer of the Hamilton, Bermuda-based company’s management unit, said by phone today."
    The reason for the charter rate crunch: plunging rates. "Crude rates remain in the doldrums,” RS Platou Markets AS, an Oslo-based investment bank, said by e-mail today. VLCCs earned $17,000 a day on average in the first quarter, down 32 percent from a year earlier, it said.  Fredriksen split Frontline Ltd. in two in December 2011, forming Frontline 2012 to withstand a slump in returns that put the original company at risk of running out of cash. Frontline Ltd.’s shares fell to the lowest since May 1999 last month and slumped 95 percent since the end of 2007.
    It has gotten so bad that VLCCs have been losing $29 a day on the benchmark Saudi Arabia- to-Japan voyage as of March 28, according to the most recent data from the Baltic Exchange in London. Frontline said in February the ships in its fleet need a daily return of $24,200 to break even.
    The collapse in charter rates can be seen below:

    Naturally, corporate income statements are getting slaughtered as a result of the plunge in revenues...



    Earnings for very large crude carriers, the industry’s biggest ships, plunged 75 percent from a year earlier to $11,624 a day, according to figures from Clarkson Plc the world’s largest shipbroker. A surplus of the supertankers seeking charters in the Persian Gulf averaged 21 percent during the first quarter, the largest glut since 2009, according to market surveys by Bloomberg.

    ... and expenses: adding insult to injury, this year shippers have to deal with not only dropping revenues, but soaring input costs as well, ironically: fuel costs.



    The exchange’s earnings assessments don’t account for speed reductions aimed at reducing fuel consumption, the industry’s largest expense. Last year’s average price of $658.54 a metric ton was more than double the 2008 level, figures compiled by Bloomberg from 25 global ports show.

    Absent some near-term miracle, it is likely that VLCC rates will continue tanking:



    There are currently 22 percent more VLCCs seeking Persian Gulf cargoes than there are likely to be shipments over the next 30 days, according to a Bloomberg survey of five shipbrokers and owners today. That was the same as last week.

    Yet while Bloomberg is quick to go with the generic explanation and blame it all on the supply side, one can't help but wonder just how much of the drop off in charter rates is a function of what has been a major collapse in global trade in the past 6 months, coupled with a drop off in end demand for energy around the world. Because while one can go with the myth of a US energy self-sufficiency, the same can certainly not be said for Japan, which is naturally the other half of the benchmark Gulf to Japan VLCC rate.
    One therefore wonders just how much of a disconnect is there between the Japanese stock market, now reflecting solely the collapse in the Yen, and the underlying economy, especially if the Japan charter rate is indicative of the true state of the Japanese economic engine (or lack thereof):
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Offline RE

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Official Shipping Thread-Baltic Dry Index
« Reply #1 on: January 15, 2014, 12:00:37 AM »
Appears that fabulous Canary in the Coal Mine, the Baltic Dry Index for Shipping Costs is Cratering again.

Use this thread for all Shipping related Newz.

RE

Baltic Dry Continues Collapse - Worst Slide Since Financial Crisis

Submitted by Tyler Durden on 01/14/2014 17:56 -0500

Despite 'blaming' the drop in the cost of dry bulk shipping on Colombian coal restrictions, it seems increasingly clear that the 40% collapse in the Baltic Dry Index since the start of the year is more than just that. While this is the worst start to a year in over 30 years, the scale of this meltdown is only matched by the total devastation that occurred in Q3 2008. Of course, the mainstream media will continue to ignore this dour index until it decides to rise once again, but for now, 9 days in a row of plunging prices is yet another canary in the global trade coalmine and suggests what inventory stacking that occurred in Q3/4 2013 is anything but sustained.
 

Baltic Dry costs are the lowest in 4 months, down 40% for the start of the year, and the worst start to a year in over 30 years...


As we noted yesterday...

Of course, we are sure the 'lead' that the Baltic Dry seems to have over global macro will be quickly ignored...

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Offline DoomerSupport

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Re: Official Shipping Thread-Baltic Dry Index
« Reply #2 on: January 15, 2014, 11:18:48 AM »
I expect the overall trend to be down for the BDI over the long term.

As energy gets more expensive, shipping raw materials to be processed elsewhere loses it's margins to processing locally, and moving the lighter, more compact, higher-value finished product becomes viable. 



Offline RE

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Re: Official Shipping Thread-Baltic Dry Index
« Reply #3 on: January 29, 2015, 04:01:36 PM »
BDI now down to 632!

Good time to buy a Container Ship and retrofit as a floating bugout machine.  :icon_sunny:


Imagine how many Tiny Homes you could fit on board one of these!


You could fit it with a couple of masts for Sail plus Solar PV cells and batteries for electric running, fish for food and grow veggies hydroponically on board, live on the High Seas and be your own floating country!

RE

 

WTF Chart Of The Day: Baltic Dry Index Crashes To Lowest In 29 Years

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Quietly behind the scenes - and not at all reflective of a collapsing global economy (because that would break the narrative of over-supply and pent-up demand) - The Baltic Dry Index plunged over 5% today to 632... That is the lowest absolute level for the global shipping rates indicator since August 1986...

 

 

"Transitory"

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Offline RE

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Baltic Dry Index Now at 29 year lows
« Reply #4 on: February 02, 2015, 09:55:43 PM »
Lower than the 2008 Crash!

We shouldn't have long to wait now.

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Baltic Dry Plunges At Fastest Pace Since Lehman, Hits New 29 Year Low

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The Baltic Dry Index dropped another 3% today to 590 - its first time below 600 since 1986 and not far from the all-time record low of 554 in July 1986. Of course, the absolute level is shrugged off by the over-supply-ists and the 'well fuel prices are down'-ists but the velocity of collapse (now over 60% in the last 3 months) suggests this far more than some 'blip' discrepancy between supply and demand - this is a structural convergence of massive mal-investment meets economic reality.

The Baltic Dry Index drops even more... new 29 year lows...

 

The fastest 3-month plunge since Lehman...

 

Over-supply...

 

Or under-demand...

 

Charts: Bloomberg

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Offline RE

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Re: Official Shipping Thread-Baltic Dry Index
« Reply #5 on: February 12, 2015, 12:32:07 PM »
Besides the BDI crashing, now looks like the Port dispute is revving up as well.

Not a good year to go into the Shipping Bizness.

RE

 

The "Catastrophic Shutdown Of America's Supply Chain" Begins: Stunning Photos Of West Coast Port Congestion

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One week ago, when previewing what may be the first lockout of the West Coast Ports since 2002, we cited the Retail Industry Leaders Association who, realizing that failure to reach an agreement between the dockworker union and their bosses, the Pacific Maritime Association representing port management would lead to devastating consequences for the US retail industry, had several very damning soundbites:

  • "a work slowdown during contract negotiations over the past seven months has already created logistic nightmares for American exporters, manufacturers and retailers dependent on an efficient supply chain. A complete shutdown would be catastrophic, with hundreds of thousands of jobs at risk if America’s supply chain grinds to a halt."
  • "A west coast port shutdown would be an economic disaster."
  • "A shutdown would not only impact the hundreds of thousands of jobs working directly in America’s transportation supply chain, but the reality is the entire economy would be impacted as exports sit on docks and imports sit in the harbor waiting for manufacturers to build products and retailers to stock shelves."

And the punchline: "The slowdown is already making life difficult, but a shutdown could derail the economy completely."

Just so readers have a sense of what is at stake, this is what the average dockworker makes: $147,000 a year in salary, plus $35,000 a year in employer-paid health care and an annual pension of $80,000 (according to an association press release). It is the overtime compensation to the total shown here, which grosses to over a quarter of a million dollars, that dockworkers are negotiating to raise or else the key US supply-chains gets it.

Incidentally, the demands of the dockworker union and their leverage is precisely the reason for the dramatic discrepancy we showed in the following chart:

 

In any case, as of last night, the choking of the US supply-chain has officially begin, when as the LA Times reported last night, "West Coast ports — including the nation's busiest in Los Angeles and Long Beach — will partially shut down for four days as shipping companies plan to dramatically slash dock work amid an increasingly contentious labor dispute."

More:

 
 

Terminal operators and shipping lines said that they would stop the unloading of ships Thursday, Saturday, Sunday and Monday, because they don't want to pay overtime to workers who, they allege, have deliberately slowed operations to the point of causing a massive bottleneck. Thursday is Lincoln's Birthday and Monday is Presidents Day, which are holidays for the workers.

 

Slowing down work "amounts to a strike with pay, and we will reduce the extent to which we pay premium rates for such a strike," said Wade Gates, spokesman for the Pacific Maritime Assn., the employer group representing the shipping companies. The local union in Los Angeles and Long Beach has denied using slowdown tactics.

Accoring to the LA Times, it is not clear if the partial shutdown foreshadows a total closure of the ports. Fears of a lockout of dockworkers, who have been without a contract since July, have risen in the last week and the two sides haven't held talks since Friday. SF Gate was far more clear on what the dockworker action means: "West Coast ports to shut down 4 days amid labor dispute."

 
 

Work delays and stoppages over the past three months have caused mounting problems for Bay Area importers and small-business owners, who say they are losing money as trucks line up daily outside the Port of Oakland waiting for container ships anchored in San Francisco Bay to unload.

 

The shutting down of port operations is ironic because it’ll make the situation worse, said union officials who claimed the association canceled a negotiating session Wednesday and has not been available since last Friday.

 

“This is an effort by the employers to put economic pressure on our members and to gain leverage in contract talks,” said Robert McEllrath, president of the longshore and warehouse union. “The union is standing by ready to negotiate, as we have been for the past several days.”

Regardless of who is at fault for the (partial) shut down, one can't blame dockworkers for doing what Greece is actively doing at the same time in its own negotiations with Europe: maximizing its leverage. Because as Bank of America showed yesterday, in a piece dedicated precisely to this topic, nothing short of 3.5% of marginal US GDP is at steak, which translated into CAGR terms, means that the fate of America's estimated 3% growth in 2015 is suddenly in the hands of a few thousand port workers, and with that, whether or not the US has a recession.

Some more thoughts from BofA:

 
 

Could port activity grind to a halt?

 

Due to continued unsuccessful contract negotiations between West Coast port employers (Pacific Maritime Association) and workers (International Longshore and Warehouse Union), there is a growing risk of a shutdown/lockout at West Coast docks, possibly within days. This past weekend, ports temporarily halted operations, adding to uncertainty. In our view, although a port strike/lockout could weigh on operations and profitability in some industries, the economic fallout of a one-week strike is likely to be limited to a loss of $0.8-1.8bn, representing a 0.1-0.2% hit to annualized GDP growth in 1Q15.

 

Size matters

 

Since the fall, a notable disruption in activity at the ports has materialized, and the risk is the current delays could spiral into full-blown gridlock, or that employers could lock out workers. West Coast ports are an important component of US trade. As cited by our Transportation Analyst Ken Hoexter, the value of total traffic at West Coast ports (waterborne, air and land) accounts for 12% of GDP. However, drilling down specifically to goods arriving/departing by water vessels (and hence, impacted by the labor dispute) reveals a much smaller share, only 3.5% of GDP or roughly $600bn, as of 2014.

 

Gauging the economy-wide risk during a shutdown

 

The economic fallout of a port shutdown is challenging to measure and depends heavily on the technique of analysis. Economic impact studies of West Coast  port shutdowns have yielded loss estimates as high as $2bn per day. However, analysis by Peter Hall of the University of Waterloo and by the US Congressional Budget Office criticized such techniques as they fail to account for the ability for firms to substitute to alternative transportation routes, resulting in inflated loss estimates. Instead, according to research published by the CBO in 2006, the fallout is likely much lower, roughly $65mn to $150mn per day if Los Angeles and Long Beach ports were to shut down for a week in 2004. To get a sense of what the risks are in today, we gross that figure up to account for higher trade volumes, and include all West Coast ports. Our back of the envelope calculation suggests the daily loss to GDP would be $150-350mn per day, or $0.8-1.8bn per week. That would represent 0.1-0.2% hit to annualized 1Q15 GDP growth.

 

Learning from the past: short-term pain is likely

 

If history is any guide, a temporary port shutdown would acutely hurt the trade sector in the short term, but would not threaten to derail the recovery. In 2002, port workers at 29 West Coast ports were locked out for roughly 10 days in October, before President Bush invoked the Taft-Hartley Act to reopen the ports.

 

What could go wrong?

 

We highlight two key scenarios that may lead to greater downside risk relative to our base case:

  • A protracted disruption could trigger non-linear (accelerating) economic costs as temporary contingency measures run their course, resulting in worsening supply chain disruptions. President Obama could intervene by invoking the Taft-Hartley Act as was done in 2002, but it is not clear if or how quickly the White House would be willing to step into a labor dispute this time around.

There is uncertainty regarding the capacity of alternative transportation routes. Extensive use of air freight and Canadian/Eastern ports may lead to capacity constraints at those sites, limiting the ability of industry to successfully substitute to alternative supply chains for an extended period.

So the bottom line is that nobody really knows what will happen if the "partial" stoppage becomes a permanent one, as dockworkers try lever their influence on the US economy (which according to financial comedy TV is so strong, it should have no problem to meet their demands, right?), but it is safe to say that the final outcome will be somewhere between the "catastrophic" devastation for the economy which the retail industry predicts, and anywhere up to a 3.5% hit to the GDP, which in turn means an economic recession, if only temporary.

One thing, however, about which there is no doubt at all, is the unprecedented congestion that has slammed the Port of Los Angeles and Long Beach harbor: that is very much real, as can be seen on the series of photos below courtesy of Mike Kelley. From his blog:

 
 

As anyone who follows my work knows, I'm fascinated by industry and infrastructure. For the past few weeks, a labor dispute has been unfolding at the Port of Los Angeles and the Port of Long Beach. After flying over the area while coming in to land at LAX, I saw all of these giant container ships anchored offshore and instantly knew that I had to photograph it.

 

The next day I called my pilot and said 'when is the soonest we can go up?!' Less than 24 hours later we were in the air. It was one of the most exciting experiences I've had doing aerial photography - being that far out at sea, with the huge swells underneath you, and these massive, massive container ships everywhere was like living a scene out of Walter Mitty's life.

Cargo ships have been backed up for weeks on end at the ports of LA and Long Beach amid a labor dispute.

 

The size of these ships blows the mind; many of them are over a thousand feet long.

 

We photographed them from anywhere between 200 and 5,500 feet, and even at this height the enormous size was something else entirely.

 

The haze and setting sun created an ethereal mood to all of the pictures

Cargoes from around the world are backed up right now

 

I've never seen ANYTHING like this, even rush hour at the 405 doesn't look so bad.

 

Colorful and massive, this ship is over 1000 feet from end to end.

 

From this angle, the scale and size of the city and ships becomes quickly apparent

* * *

Finally keep in mind that to many economists, or at least those who realize that the US economy is in a far worse shape than what official government data represents, an "exogenous" event like a West Coast port strike, just like a "Polar Vortex" is precisely what the doctor ordered. After all, what better scapegoat for the lack of growth than a few thousand dockworkers who are merely leveraging capitalism as much as they can... even if it means shutting down key US economic supply-chains in the process.

h/t @Theonlyexpert

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Offline RE

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Baltic Dry Index hits ALL TIME LOWS!
« Reply #6 on: February 13, 2015, 10:44:41 PM »
Worse these days in the Shipping Biz than during the 2008-9 Financial Crisis.

Combined with the Longshoreman's labor dispute, this is a major circling Black Swan.

RE

World's Largest Shipbuilder Reports $3 Billion Loss As Baltic Dry Index Hits New Record-er Low

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"Some Shipping Folks Are Sinking..." South Korea’s Hyundai Heavy Industries, the world’s largest shipbuilder, has reported operating loss of KRW 3.25 trillion in 2014, or about USD $2.96 billion. The operating loss in 2014 is compared to a profit of KRW 802 billion in 2013.

As GCaptain blog reports,

 
 

In the fourth quarter, South Korea’s Hyundai Heavy Industries' revenues were up 11.6 % from the previous quarter to KRW 13.8641 trillion thanks to increased working days, receipt of change orders from clients and the progress of mega-sized EPC projects in offshore and onshore businesses, the company reported.

 

However, in year-over-year (YoY) terms, HHI witnessed a slight drop of 6.5 % in revenues as low oil prices hurt the refinery business, according to HHI.

Mal-investment-driven excess supply, debt-saturated inequality-driven demand shrinkage, or both?

 

At 530, The Baltic Dry Index is at fresh record-erer lows...

 

It appears some folks were over-building a little...

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Offline agelbert

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Re: Official Shipping Thread-Baltic Dry Index
« Reply #7 on: February 13, 2015, 11:18:54 PM »
The tanking of the Baltic Dry Index is one of the most reliable indicators of the shit hitting the fan that there is.  :o

Here we go!


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Offline agelbert

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Re: Official Shipping Thread-Baltic Dry Index
« Reply #8 on: February 14, 2015, 01:36:13 PM »
Reposted because the Goldman Sachs guy claimed the shit would hit the fan about now....  :evil4:
Fasten your seat belt! The Pigmen are putting out warnings: Goldman's Kostin: Expect pullback in 4-6 weeks 
http://finance.yahoo.com/news/goldmans-kostin-expect-pullback-4-6-weeks-123545755.html

 
 


   
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Offline RE

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U.S. Containerized Exports Fall Off the Chart
« Reply #9 on: August 16, 2015, 12:14:44 AM »
Shipping not looking too good.

RE

http://wolfstreet.com/2015/08/13/us-container-freight-exports-fall-off-chart-cass-inttra-ocean-freight/

“Many of our major trading partners are experiencing stalled or slowing economies, and the strength of the US Dollar versus other currencies is making US goods more expensive in the export market.” That’s how the Cass/INTTRA Ocean Freight Index report explained the phenomenon.

What happened is this: The volume of US exports shipped by container carrier in July plunged 5.8% from an already dismal level in June, and by 29% from July a year ago. The index is barely above fiasco-month March, which had been the lowest in the history of the index going back to the Financial Crisis.

The index tracks export activity in terms of the numbers of containers shipped from the US. It doesn’t include commodities such as petroleum products that are shipped by specialized carriers. It doesn’t include exports shipped by rail, truck, or pipeline to Mexico and Canada. And it doesn’t include air freight, a tiny percentage of total freight. But it’s a measure of export activity of manufactured and agricultural products shipped by container carrier.

Overall exports have been weak. But the surge in exports of petroleum products and some agricultural products have obscured the collapse in exports of manufactured goods. For now, the currency war waged by all the other major economies catches much of the blame:

    The strength of the U.S. dollar against other currencies accounts for a significant part of the drop because of the relative price advantage our competitors have. There is concern that U.S. sellers—especially suppliers of agriculture products and food products such as meats—may have lost customers for good.

That’s the goal of a currency war. But wait… the dollar began to strengthen last year, while containerized exports have been dropping since 2012, when it was the Fed that waged a currency war against other economies, and when it was the dollar that was losing its value. So there are other reasons, long-term structural reasons unrelated to the dollar.

And some of them, the report pointed out:

    The global economy is also stumbling, with many countries experiencing contracting or stagnating economies. Export shipments fell to almost two-thirds of our top trading partners. Many of the rest experienced little or no change in their levels.

The index, at 0.664 in July, is 33.6% below the level of January 2010, when it was set at 1.00. It’s less than half of what it was in much of 2010, 2011, and 2012. This is what that multi-year collapse, as documented by Cass/INTTRA Ocean Freight Index, looks like:

US-Freight-Index-exports-2010_2015-07

Global trade had essentially come to a halt during the Financial Crisis. But by 2010, container export activity began to surge from very low levels and became part of the V-shaped “recovery.” It peaked in March 2011 of 1.61. But starting in 2012, month after month, interspersed with signs of false hope, it was beginning to fall apart. And now it has run into a global economy that is wheezing!

It’s going to get worse. The index hasn’t yet picked up on China’s devaluation of the yuan, currently at over 3% in two days. More devaluations are likely. The effect is already cascading around developing-market currencies, which are swooning. So the report: “The export market for containerized goods is not showing signs of a turnaround in the near future.”

As US exports become less competitive overseas, imports to the US get cheaper. And they’re already washing ashore tsunami like.

The import container index in July jumped 21.5% from June to the second highest level in the history of the index. It’s up 10.3% from July last year – already a record year for container imports. Much of that increase is due to rising imports from China as the back-to-school and fall merchandise arrived in the US.

But even in this scenario, problems are cropping up, according to the report: “Slow ordering patterns showing up in China’s measure of new orders indicate that US retailers are being a little cautious with their ordering.”

And they should be. Just today, the Census Bureau reported that the already sky-high business inventories – from manufacturers to retailers – rose again. Hampered by lackluster sales, the seasonally adjusted inventory-to-sales ratio reached 1.37, same as in February, the worst level since July 2009, during the Financial Crisis.

At some point, if sales don’t miraculously pick up by a whole lot, businesses are going to cut back ordering and channel-stuffing. This will curtail imports, which will hit China and other countries. And the US is supposed to be the engine that pull’s the global economy out of the quagmire.

There are consequences for the US bond market that has so vigorously and blindly funded all comers. Companies gorged on debt, even junk-rated companies. But now things are coming unglued at the riskiest end. Read… Wall Street Sees Junk Bond Collapse, Prepares to Profit from it
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Offline Palloy

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Re: Official Shipping Thread-Baltic Dry Index
« Reply #10 on: August 23, 2015, 06:31:49 PM »
http://www.zerohedge.com/news/2015-08-23/global-trade-freefall-container-freight-rates-asia-europe-crash-60-three-weeks
Global Trade In Freefall: Container Freight Rates From Asia To Europe Crash 60% In Three Weeks
Tyler Durden
8/23/2015

Three weeks ago, when we last looked at the collapse in trade along what may be the most trafficked route involving China, i.e., from Asia to Northern Europe, we noted that while that particular shipping freight rate Europe had crashed some 23% on just one week, there was some good news: at least the Baltic Dry index was still inexplicably rising, and at last check it was hovering just above 1,100.

That is no longer the case, and just as with everything else in recent months, the Baltic Dry dead cat bounce is now over, with the BDIY topping out just above 1200 on August 4, and now back in triple digit territory, rapidly sliding back to the reality of recent record lows which a few months ago we suggested hinted that much more is wrong with global trade, and the global economy, than artificially manipulated stock markets would admit.



More importantly, a major source of confusion appears to have been resolved. Recall that as we noted on August 3, "many were wondering how it was possible that with accelerating deterioration across all Chinese asset classes, not to mention the bursting of various asset bubbles, could global shippers demand increasingly higher freight rates, an indication of either a tight transportation market or a jump in commodity demand, neither of which seemed credible. We may have the answer."

We did. To wit:

    "Should the dead cat bounce in shipping rates indeed be over, and if the accelerate slide continues at the current pace, not only will shippers mothball key transit lanes, but the biggest concern for global economy, the unprecedented slowdown in world trade volumes, which we flagged a week ago, will be not only confirmed but is likely to unleash yet another global recession."

As expected, on Friday, we got confirmation that the BDIY has indeed become a lagging indicator to actual demand, when Reuters reported in its latest weekly update using data from the Shanghai Containerized Freight Index, that key shipping freight rates for transporting containers from ports in Asia to Northern Europe fell by 26.7 percent to $469 per 20-foot container (TEU) in the week ended on Friday.

The collapse in rates is nothing short of a bloodbath: "it was the third consecutive week of falling freight rates on the world’s busiest route and rates are now nearly 60 percent lower than three weeks ago.

Freight rates on the world’s busiest shipping route have tanked this year due to overcapacity in available vessels and sluggish demand in goods to be transported. Rates generally deemed profitable for shipping companies on the route are at about $800-$1,000 per TEU.

Other Europe-focused freight rates did even worse, with container freight rates from Asia to ports in the Mediterranean plunging 32.1%, while those to the US West and East coast slid by 7.9% and 9.9%, respectively.

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Offline RE

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Global Shipping Veers into Capital Destruction
« Reply #11 on: October 09, 2015, 01:41:04 AM »
http://wolfstreet.com/2015/10/09/capital-destruction-low-demand-overcapacity-sink-global-shipping-industry/


Global Shipping Veers into Capital Destruction
by Wolf Richter • October 9, 2015   

Overcapacity “will be even greater than in 2009.”

“I would be open to the possibility” of reducing the fed funds rate “even further” and go negative, explained Minneapolis Fed President Narayana Kocherlakota on Thursday. Some folks just don’t get it.

Here are the results of seven years of global QE and zero-interest-rate policies:

Global demand is going from sluggish to even more sluggish. Emerging market countries are leading the way, it is said, and China is sneezing. Brazil and Russia have caught pneumonia. Japan is feeling the hangover from Abenomics. Even if there is some growth in Europe, it’s small. And the US, “cleanest dirty shirt” as it’s now called, is getting bogged down.

And here’s what this is doing to the shipping industry, the thermometer of global economic growth.
On one side: lack of demand.

Due to the “recent slowdown in world trade” shipping consultancy Drewry on Thursday slashed its forecast for container shipping growth to 2.2% for 2015 and lowered its estimates for future years. BIMCO, the largest international shipping association representing shipowners, issued its own, even gloomier report also on Thursday:

    On the US West Coast, it’s been slow all year, starting with the labor disputes that weren’t resolved until mid-March. Since then, year-on-year growth in the second quarter was almost on par with 2014. But for the first half year alone, inbound loaded volumes dropped by 2% according to BIMCO data.

    On the Asia to Europe trades, volumes were down by 4.2% in the first half of the year as 7.4 million TEU (Twenty-foot container Equivalent Units) was transported. Northern European imports fell by 3.6%, while the East Med and Black Sea imports fell by 4.8%.

    Intra-Asia shipments remain a stronghold with ongoing positive growth around 4-5%, but the increased uncertainty surrounding the economic development in China adds doubt as to whether such a strong growth rate can be sustained for the full year.

“The severe lack of exports from China” is reflected in the China Containerized Freight Index (CCFI), BIMCO pointed out. The index, which tracks freight rates from China to major ports around the world, plunged below 800 in early July for the first time in its history (it was set at 1,000 in 1998). It’s currently at 814. The red line marks 800:


On the other side: over-capacity.

Drewry estimates that an additional 1.6 million TEU of new capacity is being added to the container shipping fleet this year, and not enough ships are being scrapped. Hence a fleet growth rate of 7.7%:

    As a result, Drewry’s Global Supply/Demand Index, a measure of the relative balance of vessel capacity and cargo demand in the market where 100 equals equilibrium, has fallen to a reading of 91 in 2015, its lowest level since the recession ravaged year of 2009.

But in 2016, another 1.3 million TEU of new capacity will be delivered. Drewry projects that its “Global Supply/Demand Index will fall to its lowest level on record over the next few years, indicating that the overhang of excess capacity will be even greater than that experienced in 2009.”

So freight rates have crashed globally. But graciously, the oil price crash led to lower bunker fuel prices, which has kept some, but not all shippers afloat.

Shipping lines have responded half-heartedly with idling some of their ships, but so far without great success in raising rates. And these ships are heavily leveraged, so idling them and not earning revenues while having to service their debts isn’t helping matters.
So shipping loans are a doozy.

Germany is a hotbed for shipping loans, to the point where Andreas Dombret, member of the Executive Board of the Bundesbank, highlighted them in February 2013 as one of the four risks to overall financial stability in Germany. He fingered two causes: plunging freight rates and overbuilding of ships of ever larger sizes, driven by “cheaply available financial means” – a direct reference to easy-money policies.

He waded into the bloodbath in Germany: shipping loan retail funds that blew up and were shuttered, banks whose shipping portfolios suffered heavy hits, an industry that was breaking down…. The Bundesbank was looking at it from a “broader perspective,” he said, with an eye “on the stability of the entire financial system.”
He knew what he was talking about.

A month later, the largest ship-financing bank in the world, HSH Nordbank, which had been bailed out in 2008, re-collapsed and was re-bailed out by its two main owners, the German states of Hamburg and Schleswig-Holstein.

The ECB, which now regulates the largest European banks and last year conducted the most intrusive stress tests in EU history, is putting pressure on HSH to finally clean up its bad loans, which still make up a stunning 23% of its total loan book, “sources” told Reuters in July. Even some Greek banks don’t have this much putrefaction hidden in their basements.

In the US, Citigroup sallied into shipping loans when it bought a “significant” part of Société Générale’s shipping loan book for an undisclosed price in June 2012.

“Citi is looking to increase their shipping exposure in the market, and it is easier to acquire loans rather than originate them from scratch,” the source told Reuters at the time. It would have “an edge” in dealing with the shipping loans because they’re mostly in dollars.

A year later, Citi converted about $500 million of loans to non-US shipping companies into complex structured securities in order to roll some of the risk off to other investors, for a price: a yield between 13% and 15%, “these people” told the Wall Street Journal. Not sure how the deal turned out and what happened to the remaining shipping loans on Citi’s books, but since then…
Here’s what’s been happening in bankruptcy court:

September 29, 2015: shipping company Daiichi Chuo KK filed for bankruptcy protection in Tokyo after four years in a row of losses, listing about $1 billion in liabilities.

February 2015: Copenship filed for bankruptcy in Copenhagen, Denmark, after losing its behind in the dry bulk market that has been struggling for a lot longer than the container market.

February 2015: China’s Winland Ocean Shipping Corp filed for Chapter 11 bankruptcy in the US.

“The combination of lower steel demand in China and the huge volume of new tonnage coming on line is what is causing panic and making this the worst bulk market since the mid-1980s,” explained at the time Hsu Chih-chien, chairman of Hong Kong and Singapore-listed shipper Courage Marine.

August 2014: Nautilus Holdings and subsidiaries filed for Chapter 11 bankruptcy in New York, listing $770 million in debts.

April 2014: Genco Shipping and Trading, owned by New York shipping tycoon Peter Georgiopoulos, filed for Chapter 11 bankruptcy in New York, listing about $1.5 billion in liabilities.

July 2013: Excel Maritime Carriers filed for bankruptcy.

There were other shipping companies that destroyed investor capital in a similar manner, and more will join. The dry-bulk fiasco started years ago, and the commodities rout has made it worse. Container shipping is just now getting put through the wringer, and the “financial pain,” as Drewry put it, will last for years.

This is what our dear soon-to-be professor Kocherlakota doesn’t get: When as a result of monetary policies, the cost of capital has been close to nil for the right folks for long enough, and desperate investors are out there blindly chasing whatever yields they can get, there are consequences: malinvestments.

And they beget overcapacity and over-supply, which beget the destruction of pricing power, which unleashes deflationary forces, which inflict heavy losses on companies in the sector, which finally seek refuge in bankruptcies, which finalize capital destruction. None of which beget a healthy economy.

So there are some issues in this distorted world, demonstrated by scary chart of a staggering reversal. Read… China, Russia, Norway, Brazil, Taiwan Dump US Treasuries
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Offline RE

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Global Trade In Freefall: China Container Freight At Record Low
« Reply #12 on: November 04, 2015, 04:30:19 PM »
http://www.zerohedge.com/news/2015-11-04/global-trade-freefall-china-container-freight-record-low-us-rail-freight-tumbles-tru


Global Trade In Freefall: China Container Freight At Record Low; Rail Traffic Tumbles, Trucking Slows Down

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Baltic Dry Index hits All-Time Low
« Reply #13 on: November 23, 2015, 08:33:39 AM »


container_ship_topplinggc2reddit-logoOff the keyboard of Michael Snyder



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Publishes on The Economic Collapse on November 19, 2015



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Discuss this article at the Economics Table inside the Diner



I was absolutely stunned to learn that the Baltic Dry Shipping Index had plummeted to a new all-time record low of 504 at one point on Thursday.  I have written a number of articles lately about the dramatic slowdown in global trade, but I didn’t realize that things had gotten quite this bad already.  Not even during the darkest moments of the last financial crisis did the Baltic Dry Shipping Index drop this low.  Something doesn’t seem to be adding up, because the mainstream media keeps telling us that the global economy is doing just fine.  In fact, the Federal Reserve is so confident in our “economic recovery” that they are getting ready to raise interest rates.  Of course the truth is that there is no “economic recovery” on the horizon.  In fact, as I wrote about yesterday, there are signs all around us that are indicating that we are heading directly into another major economic crisis.  This staggering decline of the Baltic Dry Shipping Index is just another confirmation of what is directly ahead of us.



Overall, the Baltic Dry Index is down more than 60 percent over the past 12 months.  Global demand for shipping is absolutely collapsing, and yet very few “experts” seem alarmed by this.  If you are not familiar with the Baltic Dry Shipping Index, the following is a pretty good definition from Investopedia




A shipping and trade index created by the London-based Baltic Exchange that measures changes in the cost to transport raw materials such as metals, grains and fossil fuels by sea. The Baltic Exchange directly contacts shipping brokers to assess price levels for a given route, product to transport and time to delivery (speed).



The Baltic Dry Index is a composite of three sub-indexes that measure different sizes of dry bulk carriers (merchant ships) – Capesize, Supramax and Panamax. Multiple geographic routes are evaluated for each index to give depth to the index’s composite measurement.



It is also known as the “Dry Bulk Index”.




Much of the decline of the Baltic Dry Shipping Index is being blamed on China.  The following comes from a Bloomberg report that was posted on Thursday…




The cost of shipping commodities fell to a record, amid signs that Chinese demand growth for iron ore and coal is slowing, hurting the industry’s biggest source of cargoes.



The Baltic Dry Index, a measure of shipping rates for everything from coal to ore to grains, fell to 504 points on Thursday, the lowest data from the London-based Baltic Exchange going back to 1985. Among the causes of shipowners’ pain is slowing economic growth in China, which is translating into weakening demand for imported iron ore that’s used to make the steel.




So many of the exact same patterns that we witnessed back in 2008 are playing out once again in front of our very eyes.  Below, I have shared a chart that was posted by Zero Hedge, and it shows how the Baltic Dry Shipping Index absolutely collapsed in 2008 as we headed into a major financial crisis.  Well, now the Index is collapsing again, and it is already lower than it was at any point back in 2008…



Baltic Dry Index - Zero Hedge



The evidence continues to mount that we are steamrolling toward a deflationary economic slowdown that is worldwide in scope.



Just look at the price of U.S. oil.  It just keeps on falling, and as I write this article it is sitting at $40.40.



The price of oil collapsed just before the financial crisis of 2008, and the same pattern is happening again.



And look at what is happening to commodities. The Thomson Reuters/CoreCommodity CRB Commodity Index has plummeted to the lowest level that we have seen since the last recession. It is now down more than 30 percent over the past 12 months, and it continues to fall.



So don’t be fooled by the temporary “stock market recovery” that we have witnessed.  The underlying economic fundamentals continue to decline.  We are entering a global deflationary recession, and the stock market will get the memo at some point just like we saw in 2008.



At this moment, global financial markets are teetering on the brink, and all it is going to take is some kind of major trigger event to send them tumbling over the edge.



And such an event may be coming sooner than you may think.



We live at a time when global terrorism is surging, relationships between nations are deteriorating and our planet is shaking in wild and unpredictable ways.



It wouldn’t take much to push the financial world into full-blown panic mode.  A major regional war in the Middle East, a terror attack that kills thousands, or an earthquake or volcanic eruption that affects a large U.S. city are all potential examples of “black swan events” which could fit the bill.



The global financial system has never been more primed for another 2008-style crisis.  Thanks to the fragility of the system, it could literally happen any day now.



So keep your eyes open – within weeks our world could be completely and totally different.



Offline RE

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Baltic Dry Index hits NEW All-Time Low
« Reply #14 on: December 16, 2015, 08:32:13 AM »
Wanna buy a Bunker Fuel burning cargo ship cheap?

RE

http://www.zerohedge.com/news/2015-12-16/baltic-dry-crashes-new-record-low-china-demand-collapsing

Baltic Dry Crashes To New Record Low As China "Demand Is Collapsing"

Submitted by Tyler Durden on 12/16/2015 11:17 -0500

    Baltic Dry China Jim Cramer Steel Imports


Despite a brief dead-cat-bounce late November, which Jim Cramer heralded as evidence of stabilization in China, the world's best known freight index has collapsed to new all-time record lows this morning. Amid a persistent glut of ships and ongoing concerns about Chinese steel imports, The Baltic Dry has tumbled to 471 - the lowest level in at least 30 years.

Worst. Ever.


As Bloomberg adds, China, which makes about half the world’s steel, is on track for the biggest drop in output for more than two decades, according to data compiled by Bloomberg Intelligence...

    Owners are reeling as China’s combined seaborne imports of iron ore and coal -- commodities that helped fuel a manufacturing boom -- record the first annual declines in at least a decade. While demand next year may be a little better, slower-than-anticipated growth in 2015 has led to almost perpetual disappointment for rates, after analysts’ predictions at the end of 2014 for a rebound proved wrong.

     

    “It doesn’t help that Chinese steel production is about to see the most dramatic decline to the lowest in 20 years,” said Herman Hildan, a shipping-equity analyst at Clarksons Platou Securities in Oslo. “Demand growth is collapsing.”

*  *  *

Sounds like a perfect time to hike rates and exaggerate the deflationary tsunami and monetary outflows from the world's potentially growing economies.
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