Doomstead Diner Menu => Economics => Topic started by: RE on April 02, 2013, 04:43:35 PM

Title: Official Shipping Collapse Thread
Post by: RE 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 (http://www.zerohedge.com/news/2013-04-02/oil-tanker-market-state-panic-charter-rates-plunge-cargoes-rejected)

(http://www.zerohedge.com/sites/default/files/pictures/picture-5.jpg) (http://www.doomsteaddiner.net/users/tyler-durden)
Submitted by Tyler Durden (http://www.doomsteaddiner.net/users/tyler-durden) on 04/02/2013 19:02 -0400
Title: Official Shipping Thread-Baltic Dry Index
Post by: RE 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 (http://www.zerohedge.com/news/2014-01-14/baltic-dry-continues-collapse-worst-slide-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...

(http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/01/20140114_BDIY.jpg)

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...

(http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2014/01/20140113_BDIY1.jpg)
Title: Re: Official Shipping Thread-Baltic Dry Index
Post by: DoomerSupport 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. 


Title: Re: Official Shipping Thread-Baltic Dry Index
Post by: RE 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:

(http://img.scoop.it/jd5JAH2IYcNQxLgIrnctUIXXXL4j3HpexhjNOf_P3YmryPKwJ94QGRtDb3Sbc6KY)

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

(http://www.ihomedecoration.com/wp-content/uploads/2015/01/shipping-container-homes-for-sale2.jpg)

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

Tyler Durden's picture



 

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"

Title: Baltic Dry Index Now at 29 year lows
Post by: RE on February 02, 2015, 09:55:43 PM
Lower than the 2008 Crash!

We shouldn't have long to wait now.

RE

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

Tyler Durden's picture



 

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

Title: Re: Official Shipping Thread-Baltic Dry Index
Post by: RE 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

Tyler Durden's picture





 

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:

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

Title: Baltic Dry Index hits ALL TIME LOWS!
Post by: RE 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

Tyler Durden's picture



 

"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...

Title: Re: Official Shipping Thread-Baltic Dry Index
Post by: agelbert 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!


(http://www.createaforum.com/gallery/renewablerevolution/3-280914153654.gif)
Title: Re: Official Shipping Thread-Baltic Dry Index
Post by: agelbert 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://www.freesmileys.org/smileys/smiley-scared002.gif)
http://finance.yahoo.com/news/goldmans-kostin-expect-pullback-4-6-weeks-123545755.html (http://finance.yahoo.com/news/goldmans-kostin-expect-pullback-4-6-weeks-123545755.html)

(http://www.doomsteaddiner.net/forum/MGalleryItem.php?id=610) 
(http://www.doomsteaddiner.net/forum/MGalleryItem.php?id=557) 
(http://www.doomsteaddiner.net/forum/MGalleryItem.php?id=550)

(https://allthoughtsworkoutdoors.files.wordpress.com/2011/08/p9047017-030close-up.jpg)(http://www.animatedimages.org/data/media/142/animated-volcano-image-0010.gif)  (http://www.freesmileys.org/emoticons/emoticon-object-034.gif)  (http://www.freesmileys.org/smileys/smiley-scared003.gif)
Title: U.S. Containerized Exports Fall Off the Chart
Post by: RE 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/ (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
Title: Re: Official Shipping Thread-Baltic Dry Index
Post by: Palloy 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 (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.

(http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/08/2015-08-23_9-02-48%20BDIY_0.jpg)

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.

[more]
Title: Global Shipping Veers into Capital Destruction
Post by: RE on October 09, 2015, 01:41:04 AM
http://wolfstreet.com/2015/10/09/capital-destruction-low-demand-overcapacity-sink-global-shipping-industry/ (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:

(http://wolfstreet.com/wp-content/uploads/2015/10/China-Containerized-Freight-Index-2015-09-25.png)

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
Title: Global Trade In Freefall: China Container Freight At Record Low
Post by: RE 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 (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

(http://zerohedge.com/sites/default/files/images/user5/imageroot/2015/10/20151103_CCFI_0.jpg)
Title: Baltic Dry Index hits All-Time Low
Post by: Guest on November 23, 2015, 08:33:39 AM


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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.


Title: Baltic Dry Index hits NEW All-Time Low
Post by: RE 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 (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.

(http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/12/20151216_bdiy_0.jpg)

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.
Title: Re: Baltic Dry Index hits NEW All-Time Low
Post by: Golden Oxen on December 16, 2015, 08:50:29 AM
As a brief addenda to this posting, this is the quarter it is usually the Strongest. The first quarter of the year is it's seasonal Weakest point.  ::)
Title: Freight Shipments Hammered by Inventory Glut, Weak Demand
Post by: RE on December 16, 2015, 09:50:43 AM
It's not just the bulk commodities.  It's going all across the shipping industry including rail and trucking.

RE

http://wolfstreet.com/2015/12/15/freight-shipments-plummet-as-inventory-glut-bites/ (http://wolfstreet.com/2015/12/15/freight-shipments-plummet-as-inventory-glut-bites/)

Freight Shipments Hammered by Inventory Glut, Weak Demand
by Wolf Richter • December 15, 2015   

The goods-based economy swoons.

The transportation sector just keeps getting worse. Even after today’s uptick, the Dow Jones Transportation Average is back where it was in April 2014, and down 18% from its peak a year ago. Within this transportation sector is freight, a gauge of the goods-based economy, which is having a rough time.

In November, the number of freight shipments in North America plunged 5.1% from a year ago, according to the Cass Freight Index. It hit the worst level for any November since 2011.

The index is based on $28 billion in freight transactions processed by Cass on behalf of its client base of “hundreds of large shippers,” Cass explains. It covers shipments, regardless of the mode of transportation, including shipments by truck and rail. It does not cover bulk commodities. Shippers include companies in consumer packaged goods, food, automotive, chemical, OEM, heavy equipment, and retail.

This index of shipment volume has been lower year-over-year every month, with the exception of January and February, which makes for an increasingly awful looking year:

(http://wolfstreet.com/wp-content/uploads/2015/12/US-freight-index-2015-11-shipments.png)

Reasons for these lousy shipment volumes are spread throughout the economy, including a litany of big retailers that have come forward with crummy results and disappointing projections.

Yesterday it was Dallas-based Neiman Marcus, which caters to luxury shoppers. It reported its first quarterly sales decline since 2009, down 1.8% from a year ago, with same-store sales down 5.6%. It booked a loss and laid off 500 people. As so many times, there’s a private-equity angle to it: Subject of an LBO in 2005, it’s now owned by Ares Capital and the Canadian Pension Plan Investment Board. They were hoping to make a bundle via an IPO. But now the IPO has been put on hold.

CEO Karen Katz blamed the oil and gas fiasco. Its customers in Texas run and own companies in the depressed energy sector, or they receive royalty checks. Alas… “Business conditions were quite challenging,” Katz said. She also blamed the “strong dollar” that prevented foreign tourists from splurging at its stores in the gateway cities Honolulu, San Francisco, Las Vegas, New York, Washington, and Miami.

This follows the disastrous results at Men’s Wearhouse, which blamed its misbegotten foray into M&A. At the company it acquired, Jos. A Banks, same-store sales plunged 14.6%.

Retailers are lamenting their high inventories. But not just retailers. Total business inventories across the country have piled up to suffocating levels. Given lackluster sales, the crucial inventory-to-sales ratio, which measures inventory turnover, has reached 1.38, worse than it had been in October 2009 during the Financial Crisis:

(http://wolfstreet.com/wp-content/uploads/2015/12/US-business-inventories-20042015-11.png)

And Cass issued a warning about this inventory glut:

    The Federal Reserve has held back from raising interest rates, but is expected to announce higher rates in December. This will negatively affect those companies holding record high inventories, as carrying costs will begin to rise more rapidly.

So companies are trying to whittle down their inventories, and since it’s not happening via booming sales, they’re cutting orders. Shipment volume follows. And the Cass index for shipments, including rail and trucking, has been taking a drubbing in November – particularly among railroads. Cass:

    The Association of American Railroads reported a drop of 7.4% and 6.0% in carloads carried and intermodal [containers], respectively.

    The drop in intermodal reflects the high inventory levels faced by retailers and wholesalers and is more reflective of the goods included in the Cass Freight Shipments Index.

    Much of the carload loss is due to drops in bulk commodities such as coal, petroleum products and metallic ores—products not as well represented in the Cass data.

Cass summarized the situation in the economy as it impacts transportation this way:

    Imports have slowed down considerably as retailers and wholesalers have ample supply for the holiday season. The November Institute for Supply Management’s Purchasing Manager’s Index (PMI) declined almost 3%, while production was down 7%, new orders off 7.6%, and order backlog increasing 1.2%. For the first time since August 2012, the PMI Production Index has dropped to a level indicating that it is contracting.

And so the index for freight expenditures, which tracks the money spent on shipping products, plunged 9.1% in November from a year ago, on a combination of lower volumes and lower shipping rates. Except for January and February, the index has been lower year-over-year every month.

(http://wolfstreet.com/wp-content/uploads/2015/12/US-freight-index-2015-11-expenditures.png)

And December is going to be even worse: “Expect freight to erode in December following established seasonal trends,” Cass said to soothe our frayed nerves.

Retailers of all kinds in once booming Texas, not just luxury-focused Neiman Marcus, are getting hit as Oil Bust Contagion spreads into the broader economy. Read…  Retail Sales in Texas Plunge
Title: Re: Official Shipping Collapse Thread
Post by: RE on December 30, 2015, 05:52:27 PM
Lotta guys in truckstops with nuthin' to do.

RE

http://www.zerohedge.com/news/2015-12-30/wheels-just-fell-us-trucking-has-not-been-bad-financial-crisis (http://www.zerohedge.com/news/2015-12-30/wheels-just-fell-us-trucking-has-not-been-bad-financial-crisis)

The Wheels Just Fell Off: US Trucking Has Not Been This Bad Since The Financial Crisis

Submitted by Tyler Durden on 12/30/2015 19:30 -0500

    Morgan Stanley Wells Fargo
 

Earlier this month, we profiled yet another casualty of slumping trade, falling commodity prices, and mediocre, double-adjusted economic “growth”: trucking.

More specifically, we highlighted the dramatic November decline in Class 5-8 orders. The numbers for Class 8 - those trucks with a gross weight over 33K pounds and which, you’re reminded, make up the backbone of U.S. trade infrastructure and logistics - were a veritable disaster.

“Class 8 orders of 16,600 were below our channel check based 22,000-25,000 expectation, dropped 59% yr/yr and 36% from October (vs. the ten-year average 7% decrease in November from October), and was the weakest order month on a seasonally adjusted basis since August 2010,” Wells Fargo exclaimed, before adding that “clearly, November Class 8 orders slowed to weak levels and were beneath expectations.”

Yes, "clearly":

Bloomberg Sponsored Content

And a bit more from FTR:

    FTR has released preliminary data showing November 2015 North American Class 8 truck net orders at 16,475, 59% below a year ago and the lowest level since September 2012.  This was the weakest November order activity since 2009 and was a major disappointment, coming in significantly below expectations.  All of the OEMs, except one, experienced unusually low orders for the month.

“Based on what we were seeing, we thought freight and truck sales would stay strong through the end of 2015 and into 2016, with a downturn beginning at some point in the second half of 2016,” Kenny Vieth, president & senior analyst with ACT Research Co told FleetOwner. "Falling commodity prices means freight is drying up and that is freeing up [truck] capacity. Meanwhile, exporting less means manufactures like Caterpillar can’t sell as many machines overseas, so they start producing less and that reduces freight further," he added.

Well, don't look now, but Morgan Stanley is out with its latest "truck stop" (i.e. a freight transportation update) and the picture is not pretty. Have a look at the following three graphics for the bank's Truckload Freight Index broken down by flatbed, dry van, and reefer:

In short: this is the worst things have been since the crisis.

Importantly, note that the malaise is widespread. That is, you're seeing the same picture in flatbed, refrigerated, and dry van, which would certainly seem to indicate that demand for everything from foodstuffs, to building materials, to merchandise is simply collapsing. Here's a look at survey respondents' appraisal of the current situation and their outlook for demand going forward:

If, as one might suspect, this is a harbinger of what's in store for the economy in 2016, you can expect the Fed hike to be reversed in short order - with QE4 right around the corner.

*  *  *
Title: "Nowhere To Hide" As Baltic 'Fried' Index Careens To Fresh Record Low
Post by: RE on January 07, 2016, 01:52:41 PM
The Titanic has hit the Iceberg.

(https://bigmusicblog.files.wordpress.com/2013/09/titanic-thefinalword_cgi_0001.jpg)

RE

http://www.zerohedge.com/news/2016-01-07/nowhere-hide-baltic-fried-index-careens-fresh-record-low (http://www.zerohedge.com/news/2016-01-07/nowhere-hide-baltic-fried-index-careens-fresh-record-low)

"Nowhere To Hide" As Baltic 'Fried' Index Careens To Fresh Record Low
Submitted by Tyler Durden on 01/07/2016 15:00 -0500

(http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/01/20160107_bdiy_0.jpg)

Another day, another fresh all-time record low in The Baltic Dry Index as Deutsche Bank's "perfect storm" appears ever closer on the horizon. Plunging 4.7% overnight to 445 points, this is 20% lower than the previous record low in 1986 and as one strategist warns, "It’s a brutal start of the year, there’s just nowhere to hide on the market."

 

 

"This looks like a ripple effect from what happened back in August," adds Alexandre Baradez, chief market analyst at IG France, hopefully looking forward, "it might continue for a few weeks, but given China’s central bank fire power, it shouldn’t last for more than that."

But Deutsche's "perfect storm" looms...

    The improvement in dry bulk rates we expected into year-end has not materialized. And based on conversations we've had with several industry contacts, we believe a number of dry bulk companies are contemplating asset sales to raise liquidity, lower daily cash burn, and reduce capital commitments. The glut of "for sale" tonnage has negative implications for asset and equity values. More critically, it can easily lead to breaches in loan-to-value covenants at many dry bulk companies, shortening the cash runway and likely necessitating additional dilutive actions.

     

    Dry bulk companies generally have enough cash for the next 1yr or so, but most are not well positioned for another leg down in asset values

     

    The majority of publically listed dry bulk companies have already taken painful measures to adapt to the market- some have filed Chapter 11, others have issued equity at deep discounts, and most have tried to delay/defer/cancel newbuilding deliveries.

     

    The additional cushion, however, is likely not enough if asset values take another leg down; especially given the majority of publically listed dry bulk companies are already near max allowable LTV levels.

     

    The move to sell assets in unison can lead to a downward spiral, where the decline in values leads to an immediate need for additional equity to cure LTV breaches.

Source: Deustche Bank
Title: Rail Shipments Plummet to Recessionary Levels
Post by: RE on January 08, 2016, 01:44:52 PM
Choo-choo Trains not doing too good either.

RE

http://wolfstreet.com/2016/01/07/rail-volumes-at-recessionary-levels/ (http://wolfstreet.com/2016/01/07/rail-volumes-at-recessionary-levels/)

Rail Shipments Plummet to Recessionary Levels
by Wolf Richter • January 7, 2016   

“Weaknesses in energy and manufacturing, as well as world economic softening, had a negative impact on both carload and intermodal traffic in 2015.” Those were the encouraging words of John T. Gray, Senior VP of Policy and Economics at the Association of American Railroads (AAR).

Transportation is a measure of how well the real economy is clicking. Alas rail traffic is getting clobbered.

The deterioration in the second half of 2015 dragged the whole year down from 2014: carloads fell 6.1%, according to the AAR, while intermodal containers and trailers edged up 1.6%, for a total decline of 2.5%. But the deterioration late in the year was a doozie.

In December, total volume dropped 8.9% year over year, with both components down: even intermodal containers and trailers, which had been holding up for much of the year, edged down 0.7%; and carloads (bulk commodities, autos, and the like) plunged 15.6%.

Only four of the 20 carload categories showed gains, and they’re relatively small categories: miscellaneous carloads, up 46.6%; motor vehicles and parts, up 5.2% (that relentlessly booming auto sector); chemicals, up 0.7%; and waste and scrap, up 3.3%.

But the big ones got crushed: carloads of coal, the largest category – done in by the low price of US natural gas emanating from the collapsing natural gas industry – plunged 27.9%; metallic ores, the second-largest category, plunged 39.1%; and petroleum and petroleum products, the third largest category, plunged 20.5%. The commodities rout is tearing into railroads with a vengeance!

And then there was last week’s rail traffic!

Christine Hughes, Chief Investment Strategist at OtterWood Capital, put it this way: “Rail volumes at recessionary levels.”

    Last week rail carload data showed volumes fell 10.1% on a year-over-year basis resulting in the longest period of sustained weakness since 2009. Rail carloads have now fallen 5% on a year-over-year basis for the past 11 consecutive weeks. Over the last 30 years this has only happened five times and each occurrence either overlapped or preceded a recession by a few quarters.

And she added this nerve-wracking chart. Note the steep plunge to -10% at the right edge. The last three times this occurred, the economy was either entering a recession or was already deep into a recession:

(http://www.otterwoodcapital.com/wp-content/uploads/2016/01/Rail.png)

Miracles do happen, and rail traffic could turn around on a dime and recover somehow, but it would take a major miracle to get that done, and not an ordinary run-of-the-mill miracle. And those have become exceedingly rare.

For our over-indebted, junk-rated retailers, our favorite LBO queens, it’s going to get very tough. Read…  Defaults and Restructuring Next for Retailers
Title: "Nothing Is Moving," Baltic Dry Crashes , "Commerce Has Come To A Halt"
Post by: RE on January 11, 2016, 01:22:47 PM
No ships in the North Atlantic!

RE

http://www.zerohedge.com/news/2016-01-11/nothing-moving-baltic-dry-crashes-insiders-warn-commerce-has-come-halt (http://www.zerohedge.com/news/2016-01-11/nothing-moving-baltic-dry-crashes-insiders-warn-commerce-has-come-halt)

"Nothing Is Moving," Baltic Dry Crashes As Insiders Warn "Commerce Has Come To A Halt"

The continued collapse of The Baltic Dry Index remains ignored by most - besides we still have Netflix, right? But, as Dollar Vigilante's Jeff Berwick details, it appears the worldwide 'real' economy has ground to a halt!!

Last week, I received news from a contact who is friends with one of the biggest billionaire shipping families in the world.  He told me they had no ships at sea right now, because operating them meant running at a loss.

This weekend, reports are circulating saying much the same thing: The North Atlantic has little or no cargo ships traveling in its waters. Instead, they are anchored. Unmoving. Empty.

You can see one such report here.  According to it,

    Commerce between Europe and North America has literally come to a halt. For the first time in known history, not one cargo ship is in-transit in the North Atlantic between Europe and North America. All of them (hundreds) are either anchored offshore or in-port. NOTHING is moving.

     

    This has never happened before. It is a horrific economic sign; proof that commerce is literally stopped.

We checked VesselFinder.com and it appears to show no ships in transit anywhere in the world.  We aren’t experts on shipping, however, so if you have a better site or source to track this apparent phenomenon, please let us know.

We also checked MarineTraffic.com, and it seemed to show the same thing.  Not a ship in transit…

If true, this would be catastrophic for world trade. Even if it’s not true, shipping is still nearly dead in the water according to other indices.  The Baltic Dry Index, an assessment of the price of moving major raw materials by sea, was already at record all-time lows a month ago... and in the last month it has dropped even more, especially in the last week. Today BDIY hit 415...

 

Factories aren’t buying and retailers aren’t stocking.  The ratio of inventory to sales in the US is an indicator of this. The last time that ratio was this high was during the “great recession” in 2008.

Hey, Ms. Yellen, what recovery? The economy is taking on water at a rapid rate.

The storm has been building for some time, actually. Not so long ago, there was a spate of reports that the world’s automobile manufacturers were in trouble because cars were not selling and shipments were backing up around the world.

ZeroHedge reported on it this way:

    In the past several years, one of the topics covered in detail on these pages has been the surge in such gimmicks designed to disguise lack of demand and end customer sales, used extensively by US automotive manufacturers, better known as “channel stuffing”, of which General Motors is particularly guilty and whose inventory at dealer lots just hit a new record high. 

Here is a photo of unsold cars in the United Kingdom from that article.

The world’s economy seems in serious trouble. You can’t print your way to prosperity. All you are doing is hollowing out your economy. Draining it. And sooner or later it’s empty and you have to start over after a good deal of crisis and chaos.

It’s no coincidence that China is struggling desperately to contain a stock implosion.  Reportedly, banks have been told they are forbidden to buy US dollars and numerous Chinese billionaires have gone missing.  And the markets have just opened on Monday and are again deeply in the red.

Here at The Dollar Vigilante we’ve specialized in explaining the reality of the global faux-economy and why it’s important that you not believe mainstream media lies.

In the meantime, keep your eye on this shipping story!  If it is true and worldwide shipping is disastrously foundering, it’ll only be a matter of days before grocery store shelves will reflect that with increasingly bare shelves.

Are people upset now? Just wait. Interruptions in goods and services, most critically food, almost happened in 2008 during the Great Financial Crisis.  For three days worldwide shipping was stranded due to shipping companies not knowing whether or not the receiver’s bank credit was good.

That crisis was staved off due to a massive amount of money printing.  It was a temporary stay of execution, like bailing out the Titanic with coffee cups, however, and one that may reach much larger proportions in 2016.

Sailors watch the weather to see if it is safe to set sail.  Investors should be watching the economic climate with the same intensity.

We are already sailing through very stormy waters.
Title: Re: Official Shipping Collapse Thread
Post by: Eddie on January 11, 2016, 04:47:36 PM
Apparently, this story is fairly inaccurate. Not that shipping isn't down.

http://globaleconomicanalysis.blogspot.com (http://globaleconomicanalysis.blogspot.com)
Title: Re: Official Shipping Collapse Thread
Post by: RE on January 11, 2016, 05:35:10 PM
Apparently, this story is fairly inaccurate. Not that shipping isn't down.

http://globaleconomicanalysis.blogspot.com (http://globaleconomicanalysis.blogspot.com)

Wouldn't be the first time ZH exaggerated a story, and it won't be the last either.

However, looking at those maps, there don't seem to be any ships in the middle of the North Atlantic, they all seem to be nearby ports.  Statistically speaking, there should be a few in transit in the middle of the ocean, but there are none.

I'm not sure Mish's info is all that good either.

In any case, it's obviously a pretty dire situation for the shippers.  Nobody can make a profit with the shipping rates that low.

RE
Title: Re: Official Shipping Collapse Thread
Post by: agelbert on January 11, 2016, 07:07:13 PM
Apparently, this story is fairly inaccurate. Not that shipping isn't down.

http://globaleconomicanalysis.blogspot.com (http://globaleconomicanalysis.blogspot.com)

Wouldn't be the first time ZH exaggerated a story, and it won't be the last either.

However, looking at those maps, there don't seem to be any ships in the middle of the North Atlantic, they all seem to be nearby ports.  Statistically speaking, there should be a few in transit in the middle of the ocean, but there are none.

I'm not sure Mish's info is all that good either.

In any case, it's obviously a pretty dire situation for the shippers.  Nobody can make a profit with the shipping rates that low.

RE

Eddie,
I didn't read that story but I have data from shipping sites, which I posted on my channel that confirm the dire shippimg situation. There are TWO indexes that are in the tank, not just one:
1)  The Bulk Dry Index
2) The Capesize Index


Here's the story. Shipping is in deep trouble. That is NOT hyperbole.

Baltic Dry Index Falls Further: Shipping Index Slides 5% to 445 Points!  :o

January 7, 2016 by Reuters

Jan 7 (Reuters) – The Baltic Exchange’s main sea freight index, tracking rates for ships carrying industrial commodities, fell to a record low Thursday on worries over vessel demand from top importer China.

The overall index, which gauges the cost of shipping dry bulk cargoes including iron ore, cement, grain, coal and fertiliser, fell 22 points to 445 points. The near-5 percent drop took the index to its lowest since records began in January 1985.

The dry bulk shipping downturn that began in 2008 after the onset of the financial crisis has worsened significantly in recent months as demand for iron ore and coal has declined in the face of slower economic growth in China.

Analysts also see vessel lay-ups and a higher number of ships dismantled this year if the market does not improve.

“The dry bulk sector will probably have to reduce the new building orderbook and increase ship recycling in 2016 to restore the balance,” Moore Stephens shipping partner Richard Greiner said in a note on Wednesday.

A lay-up is when a ship is taken out of service, with some or all of the crew taken off. In a cold lay-up, a ship is mothballed, with only dehumidifiers to keep it from deteriorating.

The capesize index fell 68 points to 399 points as average daily earnings dropped by $562 to $4,198. Capesizes typically transport 150,000-tonne cargoes such as iron ore and coal.

Rising iron ore supplies from top miners are adding to a glut of the steelmaking raw material, weighing on prices.

The panamax index fell 14 points, a little more than 3 percent, to 450 points.

Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, decreased $110 to $3,595.

(Reporting By Nallur Sethuraman in Bengaluru; Editing by David Goodman)

(c) Copyright Thomson Reuters 2016.

https://gcaptain.com/2016/01/07/baltic-dry-index-falls-to-record-low-445-points/ (https://gcaptain.com/2016/01/07/baltic-dry-index-falls-to-record-low-445-points/)

Agelbert Comment: Look out below!
(http://www.createaforum.com/gallery/renewablerevolution/3-280914153654.gif)
Title: Re: Official Shipping Collapse Thread
Post by: agelbert on January 11, 2016, 07:19:54 PM
And here's another story that confirms how WRONG the shippers :iamwithstupid: were to think the economy would get better this year, instead of much worse.

 
More Big Ship Deliveries Set to Boost Overcapacity

January 8, 2016 by The Loadstar
(http://theloadstar.co.uk/wp-content/uploads/MSC-Oliver.jpg)
The 199,224 teu capacity MSC Oliver ultra-large container vessel in Okpo, Korea before its delivery in March 2015.

By Mike Wackett

(The Loadstar) – The seemingly never-ending quest by ocean carriers to operate bigger ships was a significant spur for orders for 60 18,000-22,000 teu behemoths in 2015, according to Alphaliner.

Carriers   (http://www.pic4ever.com/images/gen152.gif) were apparently undeterred by weakening market conditions last year  and continued their big-ship strategies – ultra-large container vessels (ULCVs) representing 24% of the total cellular orderbook.

The analyst warned that the “ongoing race” between carriers within the four east-west vessel-sharing alliances to have the lowest unit costs, by reason of the highest nominal capacity, would add to further overcapacity pressures, due to the high number of ULCVs to be delivered in the coming years.

Indeed, there are already signs that carriers have too many ULCVs – which, notwithstanding the recent trial on the transpacific tradelane by the 17,859 teu CMA CGM Benjamin Franklin, are generally restricted in their deployment to the Asia-Europe routes.

In order to obtain the holy grail of lowest unit cost, equating to the cheapest rate offers in the market, carriers must achieve high load factors, thus exerting further downward pressure on freight rates as the call goes out to sales teams: “Fill the ship at all costs.”

One carrier told The Loadstar recently that to efficiently service the trade it ideally needed a combination of different-sized ships going between Asia and North Europe, rather than a one-shoe-fits-all ULCV fleet.

Moreover, notes Alphaliner , there were 52 units of 10,000-13,300 teu ordered last year, albeit that these ships could be deployed on services going via the enlarged Panama Canal after it opens.

Meanwhile, according to Alphaliner’s latest data, the world’s cellular containership fleet had by the end of 2015 reached a total slot capacity of 19.94m teu, representing an 8.5% growth over the previous year.

A record 214 new containerships entered the market last year, adding 1.72m teu to the fleet. However, according to data from shipbroker Braemar ACM, there were just 93 vessels, or 213,000 teu demolished last year, as scrapping prices declined as a result of the global steel glut.

The consequence of reduced scrapping for the container shipping industry – as well as other shipping sectors (excluding tankers buoyed by oil storage charters) – is that charter rates have begun the year under severe pressure again.

And in the absence of demand, for many owners and operators there appears no option but to lay-up their own or long-term-chartered ships, continuing the trend of 2015 which saw the idle containership fleet swell five-fold to 1.36m teu – 6.8% of the global fleet.

Alphaliner does not see ‘early light at the end of the tunnel’ for the container liner industry, and notes that in February’s post-Chinese New Year holiday period there are several blanked sailings planned, which it said would lead to several large ships being idled.

“A significant reduction of the idle fleet is thus not expected until April,” it said.
https://gcaptain.com/2016/01/08/more-big-ship-deliveries-set-to-boost-overcapacity/ (https://gcaptain.com/2016/01/08/more-big-ship-deliveries-set-to-boost-overcapacity/)

(https://img4.fleetmon.com/thumbnails/msc-oliver_9703306_1109499.570x1140.jpg)
MSC Olliver when it is loaded
Title: World's Biggest Containership "Hard Aground" As Baltic Dry Crashes Below 300 For
Post by: RE on February 04, 2016, 04:39:13 PM
http://www.zerohedge.com/news/2016-02-04/worlds-biggest-containership-hard-aground-baltic-dry-crashes-below-300-first-time-ev (http://www.zerohedge.com/news/2016-02-04/worlds-biggest-containership-hard-aground-baltic-dry-crashes-below-300-first-time-ev)

World's Biggest Containership "Hard Aground" As Baltic Dry Crashes Below 300 For First Time Ever

Submitted by Tyler Durden on 02/04/2016 16:35 -0500

    Baltic Dry China Germany Global Economy

Before this year the lowest level The Baltic Dry Index had reached was 556 in August of 1986 and the highest was in June 2008 at a stunning 11,612. Today saw the freight index hit a new milestone however, crashing through the 300 barrier for the first time ever - at 298, this is almost 50% below the previous record low.

(http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/03/20160204_bdiy2_0.jpg)

Commodities obviously are saying something very different from "the market"...

(http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/03/20160203_comms_0.jpg)

And as Dana Lyons notes, of course much of the input into the BDI comes from the price of raw materials. Considering the deflationary spiral in commodities, the drop in the BDI to all-time lows shouldn’t be a shock.

    However, the depths that the index is now plumbing is quite alarming and suggests trouble in the global trade picture.

     

    It would also suggest perhaps that the deflationary pressure is not just a supply issue. Consider every prior drop in the Baltic Dry Index down to the 500-600 level. Each time, the index immediately jumped as if latent demand was just waiting for those lower prices. That development has not yet occurred this time around, even as prices are reaching 45% below the previous record low.

     

    The Baltic Dry Index has become a trendy thing to mention in recent years when discussing global market and economic conditions. The truth is, nobody really ever knows for sure what the broader message is behind the index’s behavior. That said, this recent plunge is making it quite difficult to conceive that it means anything positive in terms of the global economy and deflationary pressures.

And finally it's not just commodities and the Baltic Dry that stalled, as gCaptain reports, one of the world’s biggest containerships is hard aground in Germany’s Elbe River leading to the port of Hamburg.

(http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/03/20160204_bdiy1_0.jpg)

The vessel CSCL Indian Ocean ran aground Wednesday night following an apparent mechanical failure.

    An attempt to refloat the ship at around noon local time was unsuccessful.

     

    Germany’s Central Command for Maritime Emergencies (CCME) says it has been in touch with the ship owner and they are in the process of developing a salvage plan. A second attempt to refloat the ship is expected during high tide Thursday night.

     

    An overflight of the area Thursday showed no signs of pollution. There were no injuries reported.

     

    The Hong Kong-flagged ultra large container vessel (ULCV) CSCL Indian Ocean measures 399.6 meters long by 58.6 meters wide. The vessel belongs to China Shipping Container Lines, part of China Shipping Group. It is one of 5 CSCL ships with the capacity to carry a staggering 19,100 twenty foot containers.

     

    The incident has caused minor impacts to ship traffic on the Elbe River.

     

    CSCL Indian Ocean is part of a new breed of giant containerships designed to carry more than 18,000 TEUs and used to transport goods from Asia to northern Europe.

*  *  *

Quite an anology!!
Title: Shipping Worst since the Vikings
Post by: RE on March 03, 2016, 05:35:47 PM
http://www.zerohedge.com/news/2016-03-03/dry-bulk-ceo-warns-bankruptcy-tsunami-we-havent-seen-market-bad-viking-age (http://www.zerohedge.com/news/2016-03-03/dry-bulk-ceo-warns-bankruptcy-tsunami-we-havent-seen-market-bad-viking-age)

"It Hasn't Been This Bad Since The Viking Age": Dry Bulk CEO Warns Of Bankruptcy Tsunami, Counterparty Risk

(http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/03/03/Golden-ocean-ship.png)

[/b][/size]
Submitted by Tyler Durden on 03/03/2016 19:10 -0500

    Baltic Dry

In the past three months we have repeatedly shown that, despite the recent modest rebound off the all time lows, the bottom is about to fall out of the dry bulk shipping market in articles such as these:

    It Is Now Cheaper To Rent A Dry Bulk Tanker Than A Ferrari
    A "Perfect Storm Is Coming" Deutsche Warns As Baltic Dry Falls To New Record Low
    "Nothing Is Moving," Baltic Dry Crashes As Insiders Warn "Commerce Has Come To A Halt"
    World's Biggest Containership "Hard Aground" As Baltic Dry Crashes Below 300 For First Time Ever
    The Next Big Leg Lower In The Baltic Dry Is On Deck: 360 New Vessels Are About To Be Delivered

Overnight, the CEO of Dry bulk shipper Golden Ocean Group, Herman Billung spoke before an industry conference in Oslo, and made it clear that our worst-case expectations may prove to be optimistic.

Photo: Golden Ocean Group

He said that Dry Bulk shippers should expect little respite for another two years, adding that an enormous oversupply of vessels isn’t sustainable: "It's a fair assumption to make that only half of the orderbook in 2016 will be delivered."

He warned that "in the coming months there will be a lot of bankruptcies, counterparty risk will be on everybody's lips."

Useful tip: any time a CEO is warning about counterparty risk, it's probably a good idea to listen.

Just to emphasize his point to the local audience he said that "The market has never been this bad before in modern history. We haven't seen a market this bad since the Viking age. This is not sustainable for anybody and will lead to dramatic changes."

Yes, it's that bad.

And what's worse, is that once Billung is proven to be right and the dry bulk bankruptcy tsunami is unleashed sweeping away hundreds of ships with it, the next question will be just which  (mostly European) banks, have the greatest "secured" loan exposure to the dry bulk industry, a sector where we fully expect recoveries on secured loans to be in the pennies on the dollar.
Title: Re: Official Shipping Collapse Thread
Post by: Palloy on March 03, 2016, 08:05:05 PM
Quote
... banks, have the greatest "secured" loan exposure to the dry bulk industry, a sector where we fully expect recoveries on secured loans to be in the pennies on the dollar.

Nothing goes downhill faster than a steel-hulled ship at anchor in the sea.  Maintenance is expensive, and compulsory if insurance is to be obtained.  Going into dry dock to have the bottom scrapped and anti-fouled is very expensive.  Getting a ship back into commission after a lay-off is very expensive.  Coming alongside to take on fuel requires certification and insurance.  Never mind recoveries being only pennies on the dollar - owning a ship COSTS money, so there will be NO recoveries.  Cheaper to steam off into the ocean and scuttle them.  Cheapest is to just let them sink at anchor.
Title: China Ocean Freight Indices Plunge to Record Lows
Post by: RE on March 15, 2016, 10:08:06 AM
Refugee Ships Cheap!

RE

http://wolfstreet.com/2016/03/14/china-ocean-freight-indices-plunge-to-record-lows/ (http://wolfstreet.com/2016/03/14/china-ocean-freight-indices-plunge-to-record-lows/)

China Ocean Freight Indices Plunge to Record Lows
by Wolf Richter • March 14, 2016   

There’s simply no respite.

Money is leaving China in myriad ways, chasing after overseas assets in near-panic mode. So Anbang Insurance Group, after having already acquired the Waldorf Astoria in Manhattan a year ago for a record $1.95 billion from Hilton Worldwide Holdings, at the time majority-owned by Blackstone, and after having acquired office buildings in New York and Canada, has struck out again.

It agreed to acquire Strategic Hotels & Resorts from Blackstone for a $6.5 billion. The trick? According to Bloomberg’s “people with knowledge of the matter,” Anbang paid $450 million more than Blackstone had paid for it three months ago!

Other Chinese companies have pursued targets in the US, Canada, Europe, and elsewhere with similar disregard for price, after seven years of central-bank driven asset price inflation [read… Desperate “Dumb Money” from China Arrives in the US].

As exports of money from China is flourishing at a stunning pace, exports of goods are deteriorating at an equally stunning pace. February’s 25% plunge in exports was the 11th month of year-over-year declines in 12 months, as global demand for Chinese goods is waning.

And ocean freight rates – the amount it costs to ship containers from China to ports around the world – have plunged to historic lows.

The China Containerized Freight Index (CCFI), published weekly, tracks contractual and spot-market rates for shipping containers from major ports in China to 14 regions around the world. Unlike most Chinese government data, this index reflects the unvarnished reality of the shipping industry in a languishing global economy. For the latest reporting week, the index dropped 4.1% to 705.6, its lowest level ever.

It has plunged 34.4% from the already low levels in February last year and nearly 30% since its inception in 1998 when it was set at 1,000. This is what the ongoing collapse in shipping rates looks like:

(http://wolfstreet.com/wp-content/uploads/2016/03/China-Containerized-Freight-Index-2016-03-11.png)
China-Containerized-Freight-Index-2016-03-11

The rates dropped for 12 of the 14 routes in the index. They rose in only one, to the Persian Gulf/Red Sea, perhaps in response to the lifting of the sanctions against Iran, and remained flat to Japan. Rates on all other routes dropped, including to Europe (-7.9%), the US West Coast (-3.5%), the US East Coast (-1.0%), or the worst drop, to the Mediterranean (-13.4%).

The Shanghai Containerized Freight Index (SCFI), which is much more volatile than the CCFI, tracks only spot-market rates (not contractual rates) of shipping containers from Shanghai to 15 destinations around the world. It had surged at the end of last year from record lows, as carriers had hoped that rate increases might stick this time and that the worst was over. But rates plunged again in the weeks since, including 6.8% during the last reporting week to 404.2, a new all-time low. The index is now down 62.3% from a year ago:

(http://wolfstreet.com/wp-content/uploads/2016/03/China-Shanghai-Containerized-Freight-index-2016-03-11.png)
China-Shanghai-Containerized-Freight-index-2016-03-11

Rates were flat for three routes, but dropped for the other 12 routes, including to Europe, where rates plunged nearly 10% to a ludicrously low $211 per TEU (twenty-foot equivalent container unit). Rates to the US West Coast fell 8.4% to $810 per FEU (forty-foot equivalent container unit). Rates to the East Coast fell 5.2% to $1,710 per FEU. Rates to South America plunged 25.4%.

This crash in shipping rates is a result of two by now typical forces: rampant and still growing overcapacity and lackluster demand.

“Typical” because lackluster demand has been the hallmark of the global economy recently, and the problems of overcapacity have also been occurring in other sectors, including oil & gas and the commodities complex. Overcapacity from coal-mining to steel-making, much of it in state-controlled enterprises, has been dogging China for years and will continue to pose mega-problems well into the future. Overcapacity kills prices, then jobs, and then companies.

The ocean freight industry went on a multi-year binge buying the largest container ships the world has ever seen and smaller ones too. It was led by executives who believed in the central-bank dogma that radical monetary policy will actually stimulate the real economy, and they were trying to prepare for it. And it was made possible by central-bank-blinded yield-chasing investors and giddy bankers. As a result, after years of ballooning capacity, carriers added another 8% in 2015, even while demand for transporting containers across the oceans languished near the flat line, the worst performance since 2009.

“Massive Deterioration,” the CEO of Maersk, a bellwether for global trade, called the phenomenon. Read…  “Worse than 2008”: World’s Largest Container Carrier on the Slowdown in Global Trade
Title: Re: China Ocean Freight Indices Plunge to Record Lows
Post by: azozeo on March 15, 2016, 02:27:18 PM
Refugee Ships Cheap!

RE

http://wolfstreet.com/2016/03/14/china-ocean-freight-indices-plunge-to-record-lows/ (http://wolfstreet.com/2016/03/14/china-ocean-freight-indices-plunge-to-record-lows/)

China Ocean Freight Indices Plunge to Record Lows
by Wolf Richter • March 14, 2016   

There’s simply no respite.

Money is leaving China in myriad ways, chasing after overseas assets in near-panic mode. So Anbang Insurance Group, after having already acquired the Waldorf Astoria in Manhattan a year ago for a record $1.95 billion from Hilton Worldwide Holdings, at the time majority-owned by Blackstone, and after having acquired office buildings in New York and Canada, has struck out again.

It agreed to acquire Strategic Hotels & Resorts from Blackstone for a $6.5 billion. The trick? According to Bloomberg’s “people with knowledge of the matter,” Anbang paid $450 million more than Blackstone had paid for it three months ago!

Other Chinese companies have pursued targets in the US, Canada, Europe, and elsewhere with similar disregard for price, after seven years of central-bank driven asset price inflation [read… Desperate “Dumb Money” from China Arrives in the US].

As exports of money from China is flourishing at a stunning pace, exports of goods are deteriorating at an equally stunning pace. February’s 25% plunge in exports was the 11th month of year-over-year declines in 12 months, as global demand for Chinese goods is waning.

And ocean freight rates – the amount it costs to ship containers from China to ports around the world – have plunged to historic lows.

The China Containerized Freight Index (CCFI), published weekly, tracks contractual and spot-market rates for shipping containers from major ports in China to 14 regions around the world. Unlike most Chinese government data, this index reflects the unvarnished reality of the shipping industry in a languishing global economy. For the latest reporting week, the index dropped 4.1% to 705.6, its lowest level ever.

It has plunged 34.4% from the already low levels in February last year and nearly 30% since its inception in 1998 when it was set at 1,000. This is what the ongoing collapse in shipping rates looks like:

(http://wolfstreet.com/wp-content/uploads/2016/03/China-Containerized-Freight-Index-2016-03-11.png)
China-Containerized-Freight-Index-2016-03-11

The rates dropped for 12 of the 14 routes in the index. They rose in only one, to the Persian Gulf/Red Sea, perhaps in response to the lifting of the sanctions against Iran, and remained flat to Japan. Rates on all other routes dropped, including to Europe (-7.9%), the US West Coast (-3.5%), the US East Coast (-1.0%), or the worst drop, to the Mediterranean (-13.4%).

The Shanghai Containerized Freight Index (SCFI), which is much more volatile than the CCFI, tracks only spot-market rates (not contractual rates) of shipping containers from Shanghai to 15 destinations around the world. It had surged at the end of last year from record lows, as carriers had hoped that rate increases might stick this time and that the worst was over. But rates plunged again in the weeks since, including 6.8% during the last reporting week to 404.2, a new all-time low. The index is now down 62.3% from a year ago:

(http://wolfstreet.com/wp-content/uploads/2016/03/China-Shanghai-Containerized-Freight-index-2016-03-11.png)
China-Shanghai-Containerized-Freight-index-2016-03-11

Rates were flat for three routes, but dropped for the other 12 routes, including to Europe, where rates plunged nearly 10% to a ludicrously low $211 per TEU (twenty-foot equivalent container unit). Rates to the US West Coast fell 8.4% to $810 per FEU (forty-foot equivalent container unit). Rates to the East Coast fell 5.2% to $1,710 per FEU. Rates to South America plunged 25.4%.

This crash in shipping rates is a result of two by now typical forces: rampant and still growing overcapacity and lackluster demand.

“Typical” because lackluster demand has been the hallmark of the global economy recently, and the problems of overcapacity have also been occurring in other sectors, including oil & gas and the commodities complex. Overcapacity from coal-mining to steel-making, much of it in state-controlled enterprises, has been dogging China for years and will continue to pose mega-problems well into the future. Overcapacity kills prices, then jobs, and then companies.

The ocean freight industry went on a multi-year binge buying the largest container ships the world has ever seen and smaller ones too. It was led by executives who believed in the central-bank dogma that radical monetary policy will actually stimulate the real economy, and they were trying to prepare for it. And it was made possible by central-bank-blinded yield-chasing investors and giddy bankers. As a result, after years of ballooning capacity, carriers added another 8% in 2015, even while demand for transporting containers across the oceans languished near the flat line, the worst performance since 2009.

“Massive Deterioration,” the CEO of Maersk, a bellwether for global trade, called the phenomenon. Read…  “Worse than 2008”: World’s Largest Container Carrier on the Slowdown in Global Trade



These ship owners are keeping their fleets at home currently.

http://www.marinetraffic.com/ (http://www.marinetraffic.com/)


Gee, I wonder why ?


 :icon_sunny:    :icon_sunny:     :evil4:   :icon_sunny:                    :evil4: :icon_sunny: :icon_sunny:
Title: Re: Official Shipping Collapse Thread
Post by: MKing on March 15, 2016, 02:51:14 PM
It seems that as the Chinese slowdown ripples through the market, this is a predictable consequence. Just knowing what happened during 2008 would indicate that this is a predictable consequence. No different than companies laying down rigs as commodity prices can't sustain a given level of activity, so people specializing in transport lay down rigs like a trucker might park his tractor.

Any country dependent on selling commodity surpluses, like Australia, will be more effected than a country with a higher percentage of customers being within its own borders, like the US.

It would be nice if people would understand this correlation, rather than turning every new number on a relative trading index (like the BDI) into some omnipotent indicator of DOOM. But for some reason the BDI is a favorite.

Title: Re: Official Shipping Collapse Thread
Post by: azozeo on March 16, 2016, 03:37:54 AM
It seems that as the Chinese slowdown ripples through the market, this is a predictable consequence. Just knowing what happened during 2008 would indicate that this is a predictable consequence. No different than companies laying down rigs as commodity prices can't sustain a given level of activity, so people specializing in transport lay down rigs like a trucker might park his tractor.

Any country dependent on selling commodity surpluses, like Australia, will be more effected than a country with a higher percentage of customers being within its own borders, like the US.

It would be nice if people would understand this correlation, rather than turning every new number on a relative trading index (like the BDI) into some omnipotent indicator of DOOM. But for some reason the BDI is a favorite.


Did you click on the marine traffic link ?
There could be many reasons WHY, here.
Insurance companies refusing to cover the event of crossing,
To many incidents with rogue waves currently, Ask the survivors of the Deep Horizon (if they'll talk) what really occurred....
The underwater activity with millions (yes, millions) of undersea volcanoes popping off,

There are minimal vessels in the Pacific right now. A handful more in the Atlantic.
Title: Re: Official Shipping Collapse Thread
Post by: RE on March 16, 2016, 03:57:46 AM
Did you click on the marine traffic link ?

Even if he did spend some of his endless online hours to click on such a link, unless it meets his delusional cornucopian belief system, he wouldn't buy it.  He lives in a world of fantasy, and since he lacks the talent to run his own blog, he tries to sell his fantasy here on the Diner on my fucking blog.  Which is a wicked losing proposition, since none of the Admins buy his spin at all and NOBODY including those who occasionally fall for his bullshit can stomach his snark and self-puffery find palatable more often than not, and so ends up getting DNFed anyhow!  lol.

Much like Guy McPherson, he has a scientific background and training, but he is fundamentally an ideologue.  There really is not much difference between Guy and Moriarty.  They both resort to Ad Hom argument when challenged, and neither one puts forth any of their own material to validate their claims.  Bullshit Artist Ideologues, in a nutshell.

RE
Title: Re: Official Shipping Collapse Thread
Post by: azozeo on March 16, 2016, 04:38:53 AM
Did you click on the marine traffic link ?

Even if he did spend some of his endless online hours to click on such a link, unless it meets his delusional cornucopian belief system, he wouldn't buy it.  He lives in a world of fantasy, and since he lacks the talent to run his own blog, he tries to sell his fantasy here on the Diner on my fucking blog.  Which is a wicked losing proposition, since none of the Admins buy his spin at all and NOBODY including those who occasionally fall for his bullshit can stomach his snark and self-puffery find palatable more often than not, and so ends up getting DNFed anyhow!  lol.

Much like Guy McPherson, he has a scientific background and training, but he is fundamentally an ideologue.  There really is not much difference between Guy and Moriarty.  They both resort to Ad Hom argument when challenged, and neither one puts forth any of their own material to validate their claims.  Bullshit Artist Ideologues, in a nutshell.

RE


Well said, Bravo !
Some journal time on the old cognitive dissonance trail may be in order here.
In the recovery movement we are suppose to send blessings to the still sick ones.


Forward to the 1st edition of the big book..........

If your not a drunk then replace the word alcohol with your name i.e. "Moriarty"

Foreward To First Edition
*Tenth Printing, August, 1946

      We, of Alcoholics Anonymous, are many thousands of men and women who have recovered from a seemingly hopeless state of mind and body. To show other alcoholics PRECISELY HOW WE HAVE RECOVERED is the main purpose of this book. For them, we hope these pages will prove so convincing that no furthur aunthentication will be necessary. We think this account of our experiences will help everyone to better understand the alcoholic. Many do not comprehend that the alcoholic is a very sick person. And besides, we are sure that our way of living has its advantages for all.
      It is important that we remain anonymous in order to more effectively handle the overwhelming number of personal appeals which may result from this publication. Being mostly business or professional folk some of us could not carry on our occupations if known. We would like it understood that our alcoholic work is an avocation.
      When writing or speaking publicly about alcoholism, we urge each of our Fellowship to omit his personal name, designating himself instead as "A Member of Alcoholics Anonymous."
      Very earnestly we ask the press also, to observe this request, for otherwise we shall be greatly handicapped.
      We are not an organization in the conventional sence

vii
FOREWARD TO FIRST EDITION

sense of the word. There are no fees nor dues whatsoever. The only requirement for membership is an honest desire to stop drinking. We are not allied with any particular faith, sect or denomination, nor do we oppose anyone. We simply wish to be helpful to those who are afflicted.
      We shall be interested to hear from those who are getting results from this book, particularly from those who have commenced work with other alcoholics. We should like to be helpful to such cases.
      Inquiry by scientific, medical, and religious societies will be welcomed. (The Alcoholic Foundation, Grand Central Annex Post Box 459, New York City (17).)
Alcoholics Anonymous.     

Title: Re: Official Shipping Collapse Thread
Post by: RE on March 16, 2016, 12:15:24 PM
Did you click on the marine traffic link ?

Even if he did spend some of his endless online hours to click on such a link, unless it meets his delusional cornucopian belief system, he wouldn't buy it.  He lives in a world of fantasy, and since he lacks the talent to run his own blog, he tries to sell his fantasy here on the Diner on my fucking blog.  Which is a wicked losing proposition, since none of the Admins buy his spin at all and NOBODY including those who occasionally fall for his bullshit can stomach his snark and self-puffery find palatable more often than not, and so ends up getting DNFed anyhow!  lol.

Much like Guy McPherson, he has a scientific background and training, but he is fundamentally an ideologue.  There really is not much difference between Guy and Moriarty.  They both resort to Ad Hom argument when challenged, and neither one puts forth any of their own material to validate their claims.  Bullshit Artist Ideologues, in a nutshell.

RE


Well said, Bravo !

(https://casaofgila.files.wordpress.com/2011/07/butler1.jpg)

RE
Title: Buy a BIG Boat for $1!
Post by: RE on April 23, 2016, 03:37:53 AM
And you thought the prices of sailboats were cheap!  :o

How many Refugees could you fit on one of these? ???  :icon_scratch:

RE

http://www.theguardian.com/business/2016/apr/22/yours-for-1-58429-deadweight-tonne-bulk-carrier-one-previous-owner (http://www.theguardian.com/business/2016/apr/22/yours-for-1-58429-deadweight-tonne-bulk-carrier-one-previous-owner)

Yours for $1: 58,429 deadweight tonne bulk carrier, one previous owner

Goldenport delists from LSE and agrees to fleet sell-off as it faces debts of over £100m, underlining severe headwinds faced by shipping industry

(https://i.guim.co.uk/img/media/8cb60500f3a6617d3d4a71e5621f428cb5f3006e/0_14_800_480/master/800.jpg?w=620&q=55&auto=format&usm=12&fit=max&s=a0a1bcd467c0251fae25298fc1f2e11c)
The Eleni D is one of six ships sold off by the striken shipping company, Goldenport. Photograph: marinetraffic.com

Terry Macalister
@TerryMac999

Friday 22 April 2016 14.11 EDT
Last modified on Friday 22 April 2016 18.35 EDT

Goldenport, one of the last shipping companies left on the London Stock Exchange, has delisted from the market and sold off six of its remaining eight vessels for $1 (69p) each.

The giveaway reflects the most dismal shipping conditions in decades, caused by economic slowdown in China combined with an oversupply of vessels due to a building spree during a previous boom.

The Greek owners are looking for buyers for two remaining vessels and are taking Goldenport off the stock market, saying it no longer makes sense to list shares which have dropped from highs of £50 in 2007 to less than 1.5p.

John Dragnis, the chief executive of Goldenport, said the company’s lenders and shareholders had agreed to the fleet sell-off at a time when the company had debts of more than £100m to RBS and other banks. “The value of the vessels is less than the value of the loans due to extreme market conditions.”

He added: “Dry bulk vessels generally have fallen in value by around 60% over the last year partly because of extreme oversupply and partly because of low demand for coal as China moves towards renewable energy to curb [carbon] emissions.”

Dragnis said family and management controlled almost 60% of Goldenport and had suffered along with all other shareholders from the downturn. The Athens-based shipowner declined to predict when market conditions might pick up although he thought it could be between one and three years.
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Goldenport would continue as a private company but admitted in a statement to the stock market that its cash reserves had been “drained”. It added: “The prevailing market conditions are probably the worst of the last 30 years with the Baltic Dry Index dropping to historic lows, and average daily hire rates falling below even a vessel’s daily operating expenses.”

The six ships already sold have been transferred to the ownership of small companies owned by the Dragnis family which originally set up Goldenport and brought the company to the stock market.

The announcement of plans to float in 2006, when the shipping markets were riding high on China’s fast-tracked industrialisation programme, boasted of the value to come.
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Goldenport was active, it said, in two main segments of the international shipping market, containers and dry bulk “enhancing stability of revenue streams”. It added that there would be “highly predictable cash flows due to long term contractual arrangements with large established charter counterparties”.

The boom before 2005 encouraged shipbuilding – particularly in China – but caused huge overcapacity as the market turned to bust after 2012. All but one of the Goldenport vessels themselves were built in 2010 and 2011.

Richard Fulford-Smith, the founder of the Affinity shipbroking firm and a leading figure in the London maritime scene, said the bulk shipping markets were in “a sad state” and there could be more bankruptcies and exits before any bounce back. Fulford-Smith, 60, added: “I will probably be retired by the time there is any real recovery.”
Title: Re: Official Shipping Collapse Thread
Post by: Palloy on April 23, 2016, 06:34:14 AM
Quote
And you thought the prices of sailboats were cheap!

Just think of the cost of paint to do the decks, let alone anti-fouling for the bottom.  At $1, the new owner has set themselves up for bankruptcy too.
Title: Re: Official Shipping Collapse Thread
Post by: JRM on April 23, 2016, 09:32:58 AM
$1 from just anyone?  I could buy it and sell it for scrap?
Title: Re: Official Shipping Collapse Thread
Post by: Eddie on April 23, 2016, 11:31:00 AM
The thing is, that none of us could qualify to even bid on a deal like that. You would have be able to prove that you COULD provide a place to park that vessel, for one thing. You can't just buy a ship and anchor it out somewhere.

It probably will be scrapped. It's probably the breakers who bought it for 69p.
Title: Re: Official Shipping Collapse Thread
Post by: JRM on April 23, 2016, 01:04:12 PM
You would have be able to prove that you COULD provide a place to park that vessel, for one thing. You can't just buy a ship and anchor it out somewhere.

I have no idea what sort of a sale we're talking about, as I've never bought anything big or fancy.  But if I buy a used car from somebody she's not going to ask me to prove I have a place to park it.

I'm just curious about the $1 price and what it means.  It basically seems to mean, "please take this thing away from me, please".

Seems if it was that simple I could find a captain to sail it around a while as we figured out what use to put it to.  But I guess a regular guy like me can't make an offer 'cause they don't let dirty hippies like me into their fancy digs.

Title: Re: Official Shipping Collapse Thread
Post by: Eddie on April 23, 2016, 02:10:27 PM
The owner was willing to sell a ship that cost perhaps 40 million dollars to build for a dollar. That's because the meter is always running, and an idle tanker costs the owner something like 25 to 30 thousand dollars a day to keep floating.

Selling an idle tanker for one dollar might save a hundred thousand in a week. A million over a couple of months or so.
Title: Korean Air Estimates Hanjin-Related Losses at Up to $344 Million
Post by: RE on September 01, 2016, 11:49:04 AM
Nice example of cascading debt default.

RE


http://www.bloomberg.com/news/articles/2016-08-31/korean-air-estimates-hanjin-related-losses-at-up-to-344-million (http://www.bloomberg.com/news/articles/2016-08-31/korean-air-estimates-hanjin-related-losses-at-up-to-344-million)


Korean Air Estimates Hanjin-Related Losses at Up to $344 Million
Dave McCombs

August 31, 2016 — 3:57 PM AKDT

    Carrier owns 33% of container line that filed for receivership
    Airline also made loans to Hanjin as part of logistics group

Korean Air Lines Co. estimated losses on its investments in Hanjin Shipping Co., which applied for court receivership Wednesday, at more than a third of projected operating income for this year.

Losses on loans and an equity stake in the container shipping line will be as much as 383.3 billion won ($344 million), Korean Air Lines said in a regulatory filing Wednesday. Operating profit for the airline will probably be 1 trillion won this year, according to the average of analyst estimates.

Hanjin Shipping is part of Hanjin Group, which also owns Korean Air Lines, the world’s third-largest cargo airline. Korean Air loaned funds to Hanjin Shipping and bought shares in the container line in 2014 to become the biggest shareholder with 33 percent. The group, which also counts airport services, logistics and mineral water among its businesses, is headed by Chairman Cho Yang Ho.

Korean freight charges surged about 50 percent after the container line filed for court receivership, Korea Economic Daily reported Thursday, citing unidentified shipping industry officials. Freight charges on Hanjin’s main route between Busan and Los Angeles have jumped to about $1,700 per forty-foot equivalent unit from $1,100.

Hanjin is among shipping lines grappling with a slump in global trade since the 2008 financial crisis and the slowest pace of economic growth in China in a quarter century.
The container line had debt of 6.1 trillion won at the end of June, according to its first-half earnings report.
Title: The Shipping Collapse Nightmare BEGINS!
Post by: RE on September 01, 2016, 05:29:01 PM
And Hanjin is only the 7th largest shipping company!  Wait until Maersk goes tits up!

RE

http://www.bbc.com/news/business-37241727 (http://www.bbc.com/news/business-37241727)

Hanjin ships, cargo and sailors stranded at sea
By Andreas Illmer BBC News

    1 September 2016
    From the section Business
(http://ichef.bbci.co.uk/news/660/cpsprodpb/13B7F/production/_90976708_gettyimages-163403461-1.jpg)
Image copyright Getty Images

With South Korea's biggest shipping company filing for bankruptcy protection, the vessels, sailors and cargo of Hanjin Shipping are stuck in limbo, stranded at sea.

Ports, fearing they will not get paid, refuse to let them dock or unload.

That means the ships are forced to wait for Hanjin, its creditors or partners to find a solution.

It's a case of unprecedented scale, with experts expecting the deadlock to last for weeks, if not months.

"[It is] a major disaster for the shipping companies and for the companies that own the goods in those containers," Greg Knowler, maritime and trade analyst with IHS Markit, told the BBC from Hong Kong.
Peak season

Not only are ships not allowed to unload, containers waiting to be picked up are also being held back by the ports as collateral over unpaid bills.

And even if the ports did allow them in, Hanjing would probably not as the vessels could expect to be immediately repossessed by the firm's creditors.

Beyond the ships and containers, there is of course the cargo within those containers - in many cases part of a tight chain of supply and delivery.

By September, the global shipping industry is already into what is its busiest time of the year ahead of the Christmas season.

"Just imagine, there are some 540,000 containers with cargo caught up at sea," explains Lars Jensen, chief executive of Sea Intelligence Consulting in Copenhagen.

(http://ichef.bbci.co.uk/news/624/cpsprodpb/6D7D/production/_90992082_gettyimages-76081399.jpg)
Image caption The cranes are ready but the Christmas merchandise is stuck at sea

That means that a lot of the goods en route to the US are geared at the busy year-end holidays and any disruption will be a major headache for the companies that have entrusted their products into the hauls of the Hanjin freighters.
Who owns what?

Let's break down the somewhat confusing ownership structure at play here.

Hanjin operates partly with its own ships, and partly with vessels it leases from others. So some of the vessels stuck at sea are owned by other companies who now can't get them back and on top of that have to assume they won't get paid for leasing them in the first place.

The containers on board the ships are also not all Hanjin's own. As the company is part of an alliance with five other cargo firms, there will be a mix of containers on each vessel - some belonging to Hanjin, the rest to the other four partners.

And lastly, there are the firms who own the content of the containers, for instance an Asian electronics firm sending its goods to the US market.

Hanjin's bankruptcy is the largest ever to hit the shipping industry so there's no roadmap as to what will happen now, no precedent of comparable scale.
Stuck in ports

There are the containers stuck at ports.

(http://ichef.bbci.co.uk/news/624/cpsprodpb/1F5D/production/_90992080_hi035009564.jpg)
Image caption Countless containers are stuck in ports around the globe

Let's take a container brought from, say, the Philippines to Hong Kong, to then be picked up from there and taken to the US.

Birthing and handling of that cargo at the Hong Kong port costs money. If Hanjin can't pay that, the port will hold on to those containers as collateral until someone will be willing to pay.

A possible solution would be that the companies who own the contents of those containers ask other shipping companies to step in and pick up where Hanjin left off. The cost of this would be immense, and would come on top of anything they had already paid to Hanjin beforehand. Part of it might be covered by insurance but it would still be an extremely costly endeavour.
Stuck at sea

The containers stuck on board the ships are the next problem. While at sea, there is no way to get the cargo off board.

Ships that are only leased by Hanjin could see their actual owner take back control and bring them into a harbour. They would still need to be cleared of their cargo but could then be leased to other companies.

Given that the owners of any leased vessels would probably not want to foot the bill themselves they may try to draft in the four partner lines that have containers on the ship or maybe even the companies whose cargo is inside those containers.

(http://ichef.bbci.co.uk/news/624/cpsprodpb/11857/production/_90976717_gettyimages-52621740-1.jpg)
Image caption Hanjin's bankruptcy is the largest ever to hit the shipping industry

The ships owned by Hanjin itself would most likely have to be sold before anyone would bring in the money to get them into a port and cleared. The fact that they would have to be sold as is, i.e. at sea, and with a load of overdue containers on board would probably weigh down the price of the vessels.
Stranded sailors

Each stranded ship has about 15 to 25 crew on board. Unable to call at any port, they will have to depend on the supplies they have with them until a solution can be found. While food should last long enough, they will eventually need fuel.

In a worst-case scenario, should they find themselves unable to pay for fuel being delivered by a shuttle, they would risk running into serious trouble. In that case though, nearby ports would likely be forced to accept them.

Aside from the prospect of being stuck for weeks at sea, the sailors will also face uncertainly over their wages. Most of them are not actually hired by Hanjin but by crewing agencies. Those agencies are unlikely to get paid by Hanjin and therefore won't be able to pay the crews.

"Unless someone steps in very quickly - and there is no sign of that - this will last a very long time," according to Mr Jensen.

Ships, cargo and crew might find themselves stuck for weeks, if not months, without knowing when and where their current voyage will end.
Title: Re: Official Shipping Collapse Thread
Post by: Palloy on September 02, 2016, 08:14:34 PM
http://www.zerohedge.com/news/2016-09-02/ripple-effect-could-be-tremendous-retailers-demand-government-bailout-after-hanjin-c (http://www.zerohedge.com/news/2016-09-02/ripple-effect-could-be-tremendous-retailers-demand-government-bailout-after-hanjin-c)
"Tremendous Ripple Effects" - Retailers Demand Bailout After Hanjin Collapse Paralyzes Trade
Tyler Durden
Sep 2, 2016

When we first reported about the imminent paralysis of an unknown number of global supply chains and a potential shock in worldwide trade as a result of the historic bankruptcy of Hanjing Shipping, one of the world's largest container shipping companies which handles 8% of Trans-Pacific trade volume for the US market, we concluded that "the global implications from the bankruptcy are unknown: if, as expected, the company's ships remain "frozen" and inaccessible for weeks if not months, the impact on global supply chains will be devastating, potentially resulting in a cascading waterfall effect, whose impact on global economies could be severe as a result of the worldwide logistics chaos. The good news is that both economists and corporations around the globe, both those impacted and others, will now have yet another excuse on which to blame the "unexpected" slowdown in both profits and economic growth in the third quarter."

However, not even this extreme forecast captured what would happen just 48 hours later, when as the WSJ reported overnight, retailers have gone far beyond simply blaming the Hanjing bankruptcy for their upcoming woes: they are petitioning for a government bailout, or as the WSJ put it, they are "bracing for a blow as they stock up for the crucial holiday sales season, asked the government to step in and help resolve a growing crisis."

Or, as America's banks would call it, "get bailed out." And, in taking a page right out of the 2008 bank bailout, the doom and gloom scenarios emerge:

“While the situation is still developing, the prospect of harm is significant and apparent,” Sandra Kennedy, president of the Retail Industry Leaders Association, wrote in a letter to the Department of Commerce and the Federal Maritime Commission. Hanjin’s recent bankruptcy filing “presents an enormous challenge to U.S. shippers,” she said, and “could have a substantial impact on consumers and the economy at large.”

The trade group is urging the U.S. to work with ports, cargo handlers and the South Korean government to resolve the widespread disruption in freight shipments caused by the Hanjin bankrupcy filing. Futhermore, the spokesman for the Retail Industry Leaders Association said they’re hoping the South Korean government could help provide clarity and speed to the bankruptcy proceedings, which are being considered by courts there.

To an extent, the group has a point as the "clogged supply-chain" chaos unleashed by the Hanjing bankruptcy is rapidly spreading. As reported Wednesday, after the company's bankruptcy protection, on Wednesday, terminal operators, ports, cargo handlers, truckers and others have refused to handle its cargo, for fear they won’t get paid. That is causing turmoil at U.S. ports and beyond, said shippers, importers and freight forwarders. Then as we followed up yesterday, U.S.-bound cargo has been delayed at the point of origin, and cargo-laden Hanjin ships are unable to get into U.S. ports. Worse, already delivered cargo is sitting unhandled, clogging ports and occupying containers needed elsewhere. Several Hanjin ships have been seized by creditors or barred from shipping cargo from Busan, South Korea’s main port, and vessels have been turned away from ports in the U.S., China, Canada, Spain and elsewhere.

According to the WSJ, freight brokers in Asia said about 540,000 containers are expected to face delivery delays that one of them said could range from a few days to more than a month. Meanwhile, as we also reported yesterday, shipping rates have soared as freight capacity shrank overnight, and indicative rates from Busan, South Korea, to Los Angeles had risen to $2,300 a container by Thursday, up from $1,700 four days earlier. One U.S. importer said he was getting rate quotes of $2,000 a container, compared with $700 before the Hanjin news.

Meanwhile, the reason why we immediately speculated that retailers will immediately use (and abuse( the Hanjin bankruptcy as a scapegoat (and apparently, demand a government intervention) is because the turmoil will only aggravate problems for retailers grappling with the challenges and high costs of e-commerce and at a crucial time. Those most likely to be affected include Wal-Mart, Target, J.C. Penney and clothing retailers. As the WSJ adds, a target spokeswoman said the retailer is watching development closely and assessing the situation. Marilee McInnis, a spokeswoman for Wal-Mart, said, “Right now, we are waiting to hear the final determination on bankruptcy proceedings and the implications to their current assets before we will be able to assess any impact.”

The biggest hit may come for the $25 billion US toy industry, however, which has been sweating the Hanjin news, as it prepares for the holiday season, responsible for half its annual sales. Jeff Bergmann, managing director of the Toy Shippers Association, said his customers are fortunate that only about 20 containers are on Hanjin or affiliated vessels. They’ve been told their freight will be delivered to the ports, but from there, “nobody knows,” Mr. Bergmann said. Beyond that, the general concern is how long the turmoil will last. “The ripple effect could be tremendous,” he said.

Cited by the WSJ, Jessica Dankert, senior director at the Retail Industry Leaders Association, said the congestion is coming during one of the worse possible times for retailers as they stock up before the critical holiday-shopping season. “These concerns would be trouble at any time, but this is a particularly bad time for it to happen.” She said retailers are considering contingency plans that include using other carriers and working to get their cargo released.

Unfortunately, going the litigation route will be a disaster, as cargo reclamation would bottleneck the legal system and leave it stuck in limbo for years. Even without a lawsuit, cargo owners will have to wait for months to get their cargo off Hanjin ships, analysts said.

    ”In 2001, Cho Yang, a much smaller Korean carrier, went bust and it took six months before a mere 200 containers, handled by a single freight forwarder, could be taken off to ports,” said Lars Jensen of Copenhagen-based SeaIntelligence Consulting. “This is at a much bigger scale so I would not be surprised if scores of boxes on stranded Hanjin vessels ever actually make it to their destination.”

But forget the retailers, will someone please think of the ship crews? Hanjin ships carry crews of 15 to 25 sailors, and with the vessels unable to call at ports, the sailors could be stranded at sea for weeks or longer. “They have food and water for a couple of weeks,” said Basil Karatzas of New York-based Karatzas Marine Advisors & Co. “Beyond that, things may become very difficult because suppliers will no longer extend credit to Hanjin and everything must be paid in cash.”

Maybe instead of US retailers using debt to buyback their stocks and land their management teams record bonuses, it is the crews who should be petitioning for a government rescue.

Finally, anyone hoping for a quick resolution to chaos unleashed by the Hanjin bankruptcy, should not hold their breath. While Hanjin has obtained creditor protection in Korea, and secured an injunction protecting its ships against seizure domestically, it needs to quickly file for bankruptcy abroad, especially in Europe and the US, in order to keep its ships moving.

“They got the injunction in Korea, but most of their ships are out at sea or at foreign ports. Ship seizures will continue and increase around the world if there is no bankruptcy protection.” Jensen said. “But sorting out such legal matters at various jurisdictions is complicated, as Hanjin has no control on how fast foreign courts will examine its case.”

For now, the only thing certain is that chaos will grow exponentially courtesy of today's ultra sophisticated "just in time" supply chains which are amazingly efficient when they all work in sync, and just as easily lead to unprecedented problems (as we described several years ago in "Trade-Off": A Study In Global Systemic Collapse") when even the tiniest bottleneck emerges, quickly snowballing into a crisis of epic proportions.
Title: Re: Official Shipping Collapse Thread
Post by: RE on September 02, 2016, 08:27:32 PM
http://www.zerohedge.com/news/2016-09-02/ripple-effect-could-be-tremendous-retailers-demand-government-bailout-after-hanjin-c (http://www.zerohedge.com/news/2016-09-02/ripple-effect-could-be-tremendous-retailers-demand-government-bailout-after-hanjin-c)
"Tremendous Ripple Effects" - Retailers Demand Bailout After Hanjin Collapse Paralyzes Trade

This is nothing.  Hanjin is just #7.  Wait until Maersk goes Tits Up.  ::)

(https://upload.wikimedia.org/wikipedia/commons/9/9f/M%C3%A6rsk_Mc-Kinney_M%C3%B8ller.jpg)

RE
Title: Retailers scramble as shipper bankruptcy puts goods in limbo
Post by: RE on September 04, 2016, 12:07:38 AM
http://www.yourwestvalley.com/business/article_75b26c32-71a3-11e6-a578-2ff05613dffa.html (http://www.yourwestvalley.com/business/article_75b26c32-71a3-11e6-a578-2ff05613dffa.html)

Retailers scramble as shipper bankruptcy puts goods in limbo

Korean Shipper Bankruptcy

Damian Dovarganes
Korean Shipper Bankruptcy

(http://bloximages.chicago2.vip.townnews.com/yourwestvalley.com/content/tncms/assets/v3/editorial/9/66/966cb70c-71a3-11e6-ba3a-5bf16e7acb8f/57ca74540f8fd.image.jpg?resize=620%2C349)
South Korea's Hanjin Shipping Co. containers are seen in the Port of Long Beach, Calif., on Thursday, Sep 1, 2016. The bankruptcy of the Hanjin shipping line has thrown ports and retailers around the world into confusion, with giant container ships marooned and merchants worrying whether tons of goods will reach their shelves. The South Korean giant filed for bankruptcy protection on Wednesday and stopped accepting new cargo. With its assets being frozen, ships from China to Canada found themselves refused permission to offload or take aboard containers because there were no guarantees that tugboat pilots or stevedores would be paid. (AP Photo/Damian Dovarganes)

Posted: Saturday, September 3, 2016 4:45 pm

Associated Press |

NEW YORK (AP) — Some major retailers are scrambling to work out contingency plans to get their merchandise to stores as the bankruptcy of the Hanjin shipping line has thrown ports and retailers around the world into confusion.

They don't have a lot of time. Giant container ships from the South Korean-based Hanjin shipping line are marooned with their cargo of what experts say are lots of TVs and printers, but also loads of home furnishings and clothing.

Hanjin, the world's seventh-largest container shipper, filed for bankruptcy protection Wednesday and stopped accepting new cargo. With its assets being frozen, ships from China to Canada were refused permission to offload or take aboard containers because there were no guarantees that tugboat pilots or stevedores would be paid. It's also been a factor in shipping rates rising and could hurt some trucking firms with contracts to pick up goods from Hanjin ships.

The South Korean giant represents nearly 8 percent of the trans-Pacific trade volume for the U.S. market. While some retailers may already have merchandise for the holiday season affected, experts say what's most important is that the issue be resolved before the critical shipping month of October.

"Retailers always have robust contingency plans, but this degree of uncertainty is making it challenging to put those plans in place," said Jessica Dankert, senior director of retail operations for the Retail Industry Leaders Association, a trade alliance with members including companies like Best Buy, Wal-Mart and Target.

J.C. Penney said Hanjin is one of several ocean freight carriers that it uses and when it learned there might be an issue it began to divert and reroute its containers. It said it uses "a variety of transportation methods and ports" and right now does not expect a significant effect on the flow of merchandise.

Target Corp. said it is watching the situation closely and Wal-Mart said it is waiting for details about Hanjin's bankruptcy proceedings and the implications to its merchandise before it could assess the effect.

As of Friday, 27 ships had been refused entry to ports or terminals, said Hanjin Shipping spokesman Park Min. The Seoul-based company said one ship in Singapore had been seized by the ship's owner.

At the ports of Los Angeles and Long Beach, the nation's busiest port complex, three Hanjin container ships ranging from about 700 feet to 1,100 feet (213 meters to 304 meters) long were either drifting offshore or anchored away from terminals on Thursday. A fourth vessel that was supposed to leave Long Beach on Thursday morning remained anchored inside the breakwater.

"Hanjin called us and said: 'We're going bankrupt and we can't pay any bills — so don't bother asking,' " said J. Kip Louttit, executive director of the Marine Exchange of Southern California, which provides traffic control for the ports of Los Angeles and Long Beach.

That's meant cargo headed to and from Asia is in limbo, much to the distress of merchants looking to stock shelves with fall fashions or Christmas toys. "Someone from the garment industry called earlier today asking: 'How long is this going to go on, because I've got clothing out there,'" Louttit said.

Chris Rogers, a research analyst at Panjiva, which tracks international imports to the United States, said the situation isn't yet dire but could become so. October is the busiest month for cargo from South Korea to the U.S., accounting for about 11.5 percent of the annual total.

But South Korea's maritime ministry said Hanjin's troubles would affect cargo exports for two to three months, given that August-October is a high-demand season for deep-sea routes.

The Retail Industry Leaders Association wrote to U.S. Secretary of Commerce Penny Pritzker and Federal Maritime Commission Chairman Mario Cordero on Thursday, urging them to work with the South Korean government, ports and others to prevent disruptions. It said the bankruptcy is rippling through the global supply chain and could cause significant harm to consumers and the U.S. economy.

"There (are) millions of dollars' worth of merchandise that needs to be on store shelves that could be impacted by this," said Jonathan Gold, the National Retail Federation's vice president for supply chain and customs policy.

The confusion might also sink some trucking firms that contract with Hanjin to deliver cargo containers from ports to company loading bays. "They've got bills to pay — they could literally close their doors over this," said Peter Schneider, Fresno-based vice president of T.G.S. Transportation Inc.

Other shipping lines may take on some of Hanjin's traffic — but at a price. Since many vessels already are operating at high capacity, shippers may wind up paying a premium to squeeze their containers on board, said Jock O'Connell, international trade adviser to Los Angeles-based Beacon Economics.

The price of shipping a 40-foot container from China to the U.S. jumped up to 50 percent in a single day, said Nerijus Poskus, director of pricing and procurement for Flexport, a licensed freight forwarder and customs broker based in San Francisco.

The price from China to West Coast ports rose from $1,100 per container to as much as $1,700 on Thursday, while the cost from China to the East Coast jumped from $1,700 to $2,400, he said. Hanjin's bankruptcy was a major factor, he said.

Global demand and trade have suffered since the 2008 recession, but steamship lines continued to build more and larger vessels. That weaker trade and overcapacity have sent ocean shipping rates plunging in recent years. A few months ago, Poskus said, prices hit historic lows globally — down to as much as $600 per container from Shanghai to Los Angeles. That wouldn't even cover fuel costs for the huge ships, he said.

Poskus expects the spike in prices to last a month or two. With about 5 percent of ships in the global trading fleet sitting idle, he believes there is room to take over Hanjin's capacity and carriers already are discussing the possibility of adding ships. But he said prices would have to rise in order to be sustainable.

___

Jablon reported from Los Angeles. AP Business Writer Youkyung Lee in Seoul contributed to this report.
Title: Re: Retailers scramble as shipper bankruptcy puts goods in limbo
Post by: Surly1 on September 04, 2016, 04:56:03 AM
http://www.yourwestvalley.com/business/article_75b26c32-71a3-11e6-a578-2ff05613dffa.html (http://www.yourwestvalley.com/business/article_75b26c32-71a3-11e6-a578-2ff05613dffa.html)

Retailers scramble as shipper bankruptcy puts goods in limbo

This being a port city, Hanjin is a big player with one of its 258 worldwide offices here. Even our local fishwrap, "Yesterday's News Tomorrow," which continues to shrink itself to irrelevancy in an effort to amputate expenses, roused itself from its sickbed to notice:

Port announces new restrictions in wake of Hanjin bankruptcy filing
http://pilotonline.com/business/port-announces-new-restrictions-in-wake-of-hanjin-bankruptcy-filing/article_e5a31a98-c176-5166-b4b2-a070b8af4018.html (http://pilotonline.com/business/port-announces-new-restrictions-in-wake-of-hanjin-bankruptcy-filing/article_e5a31a98-c176-5166-b4b2-a070b8af4018.html)

By Robert McCabe
The Virginian-Pilot
Sep 2, 2016
(http://ktar.com/wp-content/uploads/2016/09/ap_d4851a7ab42b4260a2818f4b9bb47303-620x310.jpg)
NORFOLK

The impact of the bankruptcy filing this week by South Korea-based Hanjin Shipping Co. continues to be felt in Hampton Roads.

The Port of Virginia on Friday updated some policies announced Wednesday, reflecting Hanjin’s connections with other big ocean carriers that together make up the “CKYHE” alliance, by which they share space on one another’s ships.

The port said that effective Thursday, it would not load any cargo from Cosco Container Lines, “K” Line, Yang Ming Line and Evergreen Line – the other alliance members – onto a Hanjin vessel.

Also, no Hanjin cargo will be loaded onto any of the other members’ vessels.

The restrictions were requested by the other members, according to a port statement issued Friday:

“After careful consideration, the port agreed today to comply with the request.”

The new restrictions follow others that took effect Wednesday, banning inbound cargo from Hanjin, as well as Hanjin containers for export, at any of the port’s marine or intermodal terminals.

Only empty Hanjin containers are being accepted at the port’s Pinners Point Container Yard.

The port also said that Hanjin containers currently in transit by rail to the port would be accepted until Labor Day.

After that , any of the company’s arriving containers will be rejected.

Hanjin’s ships and containers are fixtures on Hampton Roads’ waterfront. It’s one of the largest ocean carriers in the world.

Midweek, it filed for bankruptcy protection and faced the possibility of the detention and seizure of its ships by creditors, according to The Wall Street Journal.
Title: U.S. workers unload first of Hanjin ships stalled by bankruptcy
Post by: RE on September 10, 2016, 08:28:12 PM
4 down, 80 to go.

My guess here is Da Fed is guaranteeing payment to the Port of Long Beach for unloading these ships.

RE

http://www.reuters.com/article/us-hanjinshipping-debt-usa-ports-idUSKCN11G0X5 (http://www.reuters.com/article/us-hanjinshipping-debt-usa-ports-idUSKCN11G0X5)

Business News | Sat Sep 10, 2016 6:49pm EDT
U.S. workers unload first of Hanjin ships stalled by bankruptcy

(http://s1.reutersmedia.net/resources/r/?m=02&d=20160910&t=2&i=1153059422&w=&fh=&fw=&ll=780&pl=468&sq=&r=LYNXNPEC890R0)
A Hanjin Shipping Co ship is seen stranded outside the Port of Long Beach, California, September 8, 2016. REUTERS/Lucy Nicholson

By Lisa Richwine | LOS ANGELES

Dock workers began unloading furniture, clothing and other cargo on Saturday from a container ship owned by bankrupt Hanjin Shipping Co Ltd (117930.KS), breaking a logjam that has stranded goods on a dozen vessels bound for the U.S. West Coast.

The Hanjin Greece docked at the Port of Long Beach in California early Saturday morning and workers were hauling off containers of products destined for U.S. retailers, labor union officials said.

But ending the Hanjin shipping crisis could be a protracted affair. Port operators, cargo owners, longshoremen, shippers and others all must reach financial agreements with Hanjin before each ship can be docked, officials said.

Two other ships owned by the South Korean shipper were anchored close to the Long Beach port but as of mid-day Saturday did not have orders to dock, according to the Marine Exchange of Southern California, a group that tracks cargo ship traffic. Union officials said nine others were floating in the Pacific.

Around $14 billion of cargo has been tied up globally as ports, tugboat operators and cargo handling firms refused to work for Hanjin, the world's seventh-largest container carrier, which filed for receivership in a Seoul court Sept. 4.

On Friday, courts in South Korea and the United States cleared the way for Hanjin to spend $10 million to unload cargo from four ships headed to the U.S. West Coast. And on Saturday, shareholder Korean Air approved a plan to provide 60 billion won ($54.16 million) to the troubled shipper.

While the unloading of the Hanjin Greece was underway, truck drivers had not yet been called in to transport the goods from the port for distribution to retailers, many of which are awaiting products for the busy holiday shopping season.
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"At this moment, the drivers are still idle," Patrick Kelly, secretary-treasurer for Teamsters Local 952, said at a news conference on Saturday morning.

Once its unloaded, the Hanjin Greece will be reloaded with empty containers or with containers filled with goods for export, said Barbara Maynard, a spokeswoman for Justice for Port Drivers, a union organizing effort by the Teamsters' Port Division.

Union officials have voiced concern about the welfare of crew members on Hanjin ships stuck at sea. Initial checks with Hanjin Greece workers found they were in good condition, Maynard said. "The crew on that ship at least is doing OK," she said.

(Reporting by Lisa Richwine; Editing by Sue Horton and Mary Milliken)
Title: Rail Freight Gets Clocked from all Sides in this Economy
Post by: RE on October 15, 2016, 03:37:41 PM
Choo-choo trains in trouble.  The Little Engine that Couldn't.

(https://prepareforrainblog.files.wordpress.com/2013/07/little-engine-that-could1.jpg)

RE

http://wolfstreet.com/2016/10/12/freight-railroad-shipment-decline-coal-oil-intermodal-soon-autos/ (http://wolfstreet.com/2016/10/12/freight-railroad-shipment-decline-coal-oil-intermodal-soon-autos/)

Rail Freight Gets Clocked from all Sides in this Economy
by Wolf Richter • October 12, 2016 • 44 Comments   

This hasn’t happened since the Financial Crisis.

Total US freight rail traffic, as measured in carloads and intermodal units, fell 6.1% in the week ended October 8, from the same week last year, the Association of American Railroads reported today. It was down 10% from the same week two years ago!

Both of its components were down: Carloads – transporting oil, coal, grains, chemicals, and the like – fell 5.9% in the week, to 264,165 loads. Intermodal (containers and trailers), which accounts for about 46% of total traffic, fell 6.4% from a year ago, and 6.5% from two years ago.

This comes after an already dreary September, when total freight traffic was down 4.8% from September last year, with carloads down 5.4% , and intermodal down 4.2%.

“Rail traffic in September was more of what we have come to expect this year: big declines in energy related products, continued weakness in intermodal and most other export markets, but with some strength in grain,” the AAR report said. “The fact is, in many of their markets, railroads are facing significant market uncertainties.”

These “significant market uncertainties” – actually “certainties” would be a better word – come in several packages:

The decline in car loads is mostly due to two big factors:

    The ongoing collapse of coal shipments. Power generators have been switching to natural gas and renewables, at the expense of coal. This trend started years ago when the price of natural gas collapsed and when power generators began building large utility-scale renewables facilities, particularly wind, in Texas, California, and other states.
    The total collapse of crude oil shipments. This started two years ago, when the oil bust began to bite. In the latest week, shipments of petroleum and petroleum products were down nearly 70% from the same week two years ago!

A more recent addition to the freight rail problem is the decline in intermodal traffic.

Intermodal had been the big hope for railroads. As oil and coal shipments were collapsing, intermodal was growing, and the hope was that it would be able to compensate for the decline in coal and oil shipments. But that hope fell apart in Q4 2015, when intermodal booked its first year-over-year decline (-9%) since the Financial Crisis.

This was followed by an uptick (+1%) in Q1 and by two back-to-back year-over-year declines in Q2 and Q3 (about 5% each).

It’s not just a blip. Year-to-date, US railroads reported a total volume decline of 6.9% from the same period last year, with car loads down 10.4% and intermodal units down 3.3%. Coal shipments, by far the largest category, accounting for about 30% of total carloads, plunged 25%. Petroleum and petroleum products shipments fell 22%, forest products 7.8%….

global-banking_300x250

The only bright spots in terms of carloads, year-to-date: grains (+5.6%), motor vehicles (+2.7%), chemicals (+1.7%), and “other,” the smallest category (+16.7%).

But one of these bright spots, motor vehicles, which accounts for over 7% of total carloads, is turning into the next brake shoe to drop.

Auto sales hit a record in 2015, after cheap-debt-fueled increases year after year. But in September, unit sales fell from a year ago. Year-to-date, sales are up merely 0.5%, on strength earlier this year. Inventories at dealer lots are growing. Manufacturers are piling on incentives to move the iron. Ford will close its Mustang plant for a week to deal with oversupply. The industry has been talking about a looming “car recession” for months. And unless a miracle happens, auto shipments are going to follow auto sales.

So the decline in intermodal traffic is very unwelcome. Intermodal faces a combination of different challenges: Shippers seeing less than stellar demand in the US and overseas; and fierce competition from the trucking industry.

Diesel prices have fallen over the past two years. Spot rates that trucking companies charge have dropped too. And shippers have come to see a price advantage in shipping their merchandise by truck rather than by rail. In that vein, the AAR estimates that truck freight has increased 3.5% this year through August.

To deal with these “significant market uncertainties,” as the AAR put it, railroads have been cutting costs. They’re laying off people. They’re slashing investments. They’re working on efficiencies, such as increasing train speeds, given the reduced traffic (particularly of slower-moving oil trains).

And they’re idling engines on various tracks around the country. Sightings of these long lines of hundreds of engines have become more common. In May, I reported on the majestic sight of 292 Union Pacific engines parked in the Arizona desert [Freight Rail Traffic Plunges: Haunting Pictures of Transportation Recession].

Investors, however, have piled into railroad stocks since the February low – along with just about everything else out there – hoping the glory days are back, or hoping that QE4 will commence soon, or hoping at least for a nudge from the Fed, or whatever. For example, Union Pacific shares have jumped 42% since February, but they’re still down nearly 20% from the February 2015 high.

As an industry, North American Class 1 railroads – which the AAR defines as line haul freight railroads with revenues of over $476 million – are much smaller than trucking. According to the AAR, these railroads employed about 169,000 well-paid people in 2015, compared to about 1.8 million long-haul truckers (not counting other employees at trucking companies). And for those who want to know, there are over 26,000 locomotives in service at Class 1 railroads, including a couple of thousand or so parked on sidings around the US.

But even trucking companies are cutting costs and slashing investments as the transportation recession exacts its pound of flesh. Read…  Heavy Truck Orders Plunge, Worst September since 2009
Title: Re: Official Shipping Collapse Thread - Baltic BS Index
Post by: Golden Oxen on October 28, 2016, 04:42:20 AM
I had warned here of my doubts about this indicator as more a Bull Shit index rather than one of merit and of course was ridiculed by the Dim. Having noticed the Dim becoming totally silent about it of late, decided to take a peek as to why. Sure enough the BS Index made a bottom around the mid 200 area as the Dim were shrieking the loudest and pasting it's chart on every web page imaginable. It has advanced to the 800 area as total silence engulfs me about this totally accurate indicator of the world scene. :laugh:

May Yours Truly suggest that this is what GO calls a "Goldman Suchs" indicator. One used to pork the Dim up their gaping beckoning ass holes when Lloyd and the boys are engaging in one of their frequent fuck fests of the Dim.

What it measures is unknown by me, but I would be hesitant to use it as and indicator of the health of the world economy at any particular point in time.  :icon_scratch:

A one year chart of BS index below.

                                 https://www.bloomberg.com/quote/BDIY:IND (https://www.bloomberg.com/quote/BDIY:IND) :icon_study: :WTF:

                                                         (http://s.thestreet.com/files/tsc/v2008/photos/contrib/uploads/lloydblankfein6_600x400.jpg)

 
Title: Re: Official Shipping Collapse Thread
Post by: Palloy on October 28, 2016, 08:04:38 AM
It's called the Baltic Dry Index, and since you say you don't know what it is, (but you are prepared to called the people who do know what it is "dim") I'll tell you.

https://en.wikipedia.org/wiki/Baltic_Dry_Index
The Baltic Dry Index (BDI) is an economic indicator issued daily by the London-based Baltic Exchange. Not restricted to Baltic Sea countries, the index provides "an assessment" of the price of moving the major raw materials by sea.[1] Taking in 23 shipping routes measured on a timecharter basis, the index covers Handysize, Supramax, Panamax, and Capesize dry bulk carriers carrying a range of commodities including coal, iron ore and grain."[2]

Here is the 5 year history.

(https://doomsteaddiner.net/palloy/images/BDI.290ct2016.png)

As you can see, it is a pretty volatile series, but when it was being discussed here in January, it was in the longest period of steady decline on record.  Then in the second week of February, it turned around and has had the longest period of steady increase on record.  It is currently at 798, which is off its recent 941 peak of last month, and massively off its 2013 peak. 

It would not be surprising if the series of lower and lower peaks since 2013, and the series of lower and lower troughs, is starting on another cycle.  But if we, or anyone, could actually predict that sort of thing, we could make big money on it.  AZ knows a bloke who is right 50% of the time, maybe we should ask him.

But February 2016 is in the past, so with hindsight it is theoretically possible to diagnose why BDI did such a dramatic turn around.  Perhaps the all-knowing GO would give us the answer - oh no, that's right, he doesn't even know what it measures.  My guess is that the low prices forced lots of ships to be laid up, or retired altogether, and then the modest and patchy increase in demand for shipping goods drove prices up to their current weak level.
Title: Re: Official Shipping Collapse Thread
Post by: Golden Oxen on October 28, 2016, 09:10:15 AM
It's called the Baltic Dry Index, and since you say you don't know what it is, (but you are prepared to called the people who do know what it is "dim") I'll tell you.

https://en.wikipedia.org/wiki/Baltic_Dry_Index (https://en.wikipedia.org/wiki/Baltic_Dry_Index)
The Baltic Dry Index (BDI) is an economic indicator issued daily by the London-based Baltic Exchange. Not restricted to Baltic Sea countries, the index provides "an assessment" of the price of moving the major raw materials by sea.[1] Taking in 23 shipping routes measured on a timecharter basis, the index covers Handysize, Supramax, Panamax, and Capesize dry bulk carriers carrying a range of commodities including coal, iron ore and grain."[2]

Here is the 5 year history.

(https://doomsteaddiner.net/palloy/images/BDI.290ct2016.png)

As you can see, it is a pretty volatile series, but when it was being discussed here in January, it was in the longest period of steady decline on record.  Then in the second week of February, it turned around and has had the longest period of steady increase on record.  It is currently at 798, which is off its recent 941 peak of last month, and massively off its 2013 peak. 

It would not be surprising if the series of lower and lower peaks since 2013, and the series of lower and lower troughs, is starting on another cycle.  But if we, or anyone, could actually predict that sort of thing, we could make big money on it.  AZ knows a bloke who is right 50% of the time, maybe we should ask him.

But February 2016 is in the past, so with hindsight it is theoretically possible to diagnose why BDI did such a dramatic turn around.  Perhaps the all-knowing GO would give us the answer - oh no, that's right, he doesn't even know what it measures.  My guess is that the low prices forced lots of ships to be laid up, or retired altogether, and then the modest and patchy increase in demand for shipping goods drove prices up to their current weak level.

Lucky for you Bright Boy, I'm not allowed to deal with your kind here in the manner I deem appropriate.

You shouldn't be so testy about being a member of the Dim Palloy, It's a group numbering in the billions, your hardly alone.

Accept your lot in life son, and stop trying to be something your not. You are a very bad actor Palloy, a real ham.

Your Man From Uncle Act is as ridiculous as Mr Vaughn, hopefully, unlike your Man from Uncle namesake. you won't run for President. Your Dim but definitely not retarded.  ::)

                                                         (http://cdn2.bigcommerce.com/server4900/364bb/products/114191/images/80906/282724__28642.1342528120.380.500.jpg?c=2)

                                                          Super Bright Boy  Man from UNCLE

                                                 
Title: Re: Official Shipping Collapse Thread
Post by: Eddie on October 28, 2016, 09:58:17 AM
(http://www.wildsound.ca/images/garyoldman.jpg)

Palloy is more of a George Smiley than a Napoleon Solo.
Title: Re: Official Shipping Collapse Thread
Post by: Palloy on October 28, 2016, 03:08:41 PM
Could somebody please explain what Lloyd Blankfein, and those other two I've never heard of, have got to do with this?

I note that GO hasn't commented in this thread at all, since it started in 2013.  So his appearance now, with all the benefit of hindsight, is rather opportunist.

This was published here at the BDI's all-time low in February 2016.  Can you see the cue for the big recovery about to take place? - no?, neither can I.

Quote
http://www.zerohedge.com/news/2016-02-04/worlds-biggest-containership-hard-aground-baltic-dry-crashes-below-300-first-time-ev
World's Biggest Containership "Hard Aground" As Baltic Dry Crashes Below 300 For First Time Ever
Tyler Durden
02/04/2016

Before this year the lowest level The Baltic Dry Index had reached was 556 in August of 1986 and the highest was in June 2008 at a stunning 11,612. Today saw the freight index hit a new milestone however, crashing through the 300 barrier for the first time ever - at 298, this is almost 50% below the previous record low.

(http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/03/20160204_bdiy2_0.jpg)

(http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/02/03/20160204_bdiy1_0.jpg)

Title: Re: Official Shipping Collapse Thread
Post by: Eddie on October 28, 2016, 04:12:05 PM
The permabear crowd at Zero Hedge and elsewhere has been holding up the Baltic Dry Index as evidence of impending economic doom for more than five years, and it just hasn't quite panned out. Somewhere (I think right before the BDI bottomed) GO made a post that questioned the validity of the BDI as a harbinger of economic recession. He isn't alone.

Now in regards to the BDI as an economic indicator, and there are tons of similar views out there, I have just pasted an example below, where economist Susan Lee says the following.

I suggest you watch an index that will tell you when the world economies are starting to perk up and when trade conditions are really starting to ease. It’s called the Baltic Dry Index. Essentially the Baltic Dry tracks the average daily price for shipping dry bulk like coal, iron ore, wheat and soybeans. There are three things that make it such a good leading indicator. One, the index looks at raw materials, so it captures activity at the very beginning of the production process. Two, it looks at ocean shipping, so it reveals what’s happening to international trade — the critical driver of global growth. And, three, the shipping business depends heavily on credit, so the Baltic Dry indicates whether credit is tight or loose. Back in 2005, when the world’s economies were just fine and credit was abundant, the Baltic Dry looked like a powerhouse. But it peaked in May of 2008. And it’s been heading almost straight down ever since — losing about 90 percent of its value.

I don't mean to pick on the quote above alone, a lot of people are making the same argument, the quote above was just the most convenient at hand.

But essentially one problem with using the BDI for economic forecasting is that the BDI could feasibly go up in an environment where commodities demand was shrinking, if the supply of ships was shrinking even faster. These would be negative economic factors. This is because the BDI's value is not solely driven from the demand side. To me, it makes far more sense to just look at nominal demand for commodities rather than the BDI since the BDI has the complicating factor of vessel supply growth one needs to consider. The other thing is that the BDI is a measure of spot rates for dry bulk commodities consumers who, generally, are in the near term forced to pay whatever it takes to get their raw materials shipped (A steel plant needs to keep operating despite some higher ore transportation cost). On the flipside, vessel owners are in a similar boat (no pun intended), and in the near term are generally forced to take whatever rate they can get to fill their ships. (A ship sitting around is just a cost, ie. fixed costs are high, thus using a ship at a loss is usually better than not using it at all)

Because of these inelastic characteristics of supply and demand, and since the BDI is a measure of spot rates, the BDI is thus absurdly volatile. I can explain why via the following simplified example, which I used to use frequently at Citi.

Imagine you have 10 loads of iron ore and 9 ships, and that every load of iron ore must be sent no matter what while every ship must be filled no matter what. Imagine the bidding war between those 10 iron ore consumers fighting over just 9 ships. Shipping cost would skyrocket since they all need to ship regardless of cost. Now imagine if a week later two more ships enter the market. Now imagine the bidding process. Suddenly the tables have completely changed. You have 11 ships, that all need to be filled no matter what, and only 10 loads of ore. Shipping rates would plunge, despite a period of just a week passing by. This is, in a simplified nutshell why the BDI is so volatile.

Now, add to this the fact that predicting ship supply and commodities demand has a pretty high margin of error, at the same time remembering how sensitive the BDI is to small mismatches due to the inelastic nature of its underlying supply and demand, and you quickly realize that predicting the BDI is a fool's game and also that it is not a reliable forward indicator given that it is a spot rate index in a market where both sides are basically forced to close a deal due to high fixed costs. The BDI is measure of supply/demand mismatch at the moment, and can change drastically on a dime. Its little else beyond this. It hit its peak not when the global economy was in its healthiest state, but in early 2008 when things were already starting to come apart, but Chinese commodities demand growth still had some steam and just kept outstripping stagnant vessel supply growth. For a moment. And then it all collapsed. And BDI correlators got annihilated in popular stocks such as DryShips (DRYS). Thus, let's hope that we put to rest any talk of the BDI as a reliable leading indicator, even if in six months someone datamines some new, latest correlation.

http://www.businessinsider.com/the-cost-of-global-shipping-is-a-lousy-economic-indicator-2009-5 (http://www.businessinsider.com/the-cost-of-global-shipping-is-a-lousy-economic-indicator-2009-5)



I'm not surprised you aren't familiar with Napoleon Solo, who was a character ( an American James Bond type, more or less) played by Robert Vaughn on American TV when I was a kid....but I did expect you might have known about George Smiley, who was another spy character (a Brit)  from the bestselling novels of John le Carre, which have been made into many movies, over the last fifty or more years. George Smiley was played in movies and on TV by many great actors, all the way from Rupert Davies, to James Mason, to Alec Guinness, to (more recently) Gary Oldman.

I think the Lloyd Blankfein evil grin was to represent the idea of how GS and the Wall Street wolves manipulate the poor retail muppets using hocus pocus like the BDI or whatever convenient line of BS they can use to mislead the public.



Title: Re: Official Shipping Collapse Thread
Post by: Palloy on October 28, 2016, 05:52:08 PM
Thanks for the low-down on fictitious characters in spy novels/TV when you were a kid.  I have a memory filter that stops cluttering my brain up with stuff like that.

Yes, the BDI varies with different supplies of ships and different amounts of goods to be shipped, making the index volatile.  I think I covered that before.  This volatility is an outcome of "free markets", where everything goes to the highest bidder at auction, and nothing to the poorest bidder, regardless of need.  This is yet another curse of Capitalism and a strong reason for centralised control of prices in the public interest. 

I don't see how GS can manipulate the BDI though - maybe in a derivative market used by shippers/exporters trying to hedge their risk caused by volatility caused by Capitalism.
Title: Re: Official Shipping Collapse Thread
Post by: Eddie on October 29, 2016, 09:59:53 AM
Thanks for the low-down on fictitious characters in spy novels/TV when you were a kid.  I have a memory filter that stops cluttering my brain up with stuff like that.

Was that sarcasm?

Funny how we filter the past. I can remember characters from novels I read when I was 9 or 10, but I've completely blocked the names of all the faculty where I attended dental college. I can't remember a single name, even though I knew them all on sight, their grading preferences, and which ones to really avoid.

I don't think GS can manipulate the BDI. It just isn't always well correlated to a coming recession. It is a useful thing to look at, but it's not always a leading indicator of anything. The deception comes in claiming that the BDI is extremely predictive.
Title: Re: Official Shipping Collapse Thread
Post by: Palloy on November 24, 2016, 12:48:29 PM
As goes the shipping industry, so goes the shipping-lending industry.  And the biggest of these is ... Deutsche Bank, who is looking to sell off some of its shipping loans portfolio - toxic debt anybody?  The danger, of course, is that the sale price of these loans will be low, so the value of DB's remaining loan book will be lower, ... spirals down toilet.

http://www.zerohedge.com/news/2016-11-24/germanys-second-largest-shipping-lender-40-our-shipping-loan-book-non-performing (http://www.zerohedge.com/news/2016-11-24/germanys-second-largest-shipping-lender-40-our-shipping-loan-book-non-performing)
Germany's NordLB Bank: "40% Of Our Shipping Loan Book Is Non-Performing"
Tyler Durden
Nov 24, 2016

The challenges facing Germany's second-largest shipping lender, German Landersbank NordLB first emerged this summer, when we reported that the bank was considering taking full control of its smaller, distressed peer, Bremer Landesbank (BLB), which was struggling under the weight of a portfolio of bad shipping loans in what effectively constituted a state-backed bailout. BLB, of which NordLB already owns 54.8%, had warned that it would have to take a €400m writedown on its shipping portfolio, and that as a result it was facing a “mid-triple-digit million loss” this year. As Germany's Handelsblatt wrote back in July, "shipping loans have brought Bremer LB into distress and the bank can not survive without government help, but a direct capital injection from Lower Saxony now looks unlikey."

The situation was ultimately "resolved", when NordLB said in September that it would take full control of Bremer Landesbank (the transaction is expected to close in January 1 2017), with BLB's balance sheet being absorbed by that of its bigger Landesbank peer, however it also meant that NordLB would wind up holding even more impaired shipping loans.

Then, the full extent of NordLB's problem shipping exposure was revealed today, when during a call with reporters, designated CEO Thomas Buerkle said that a whopping €8 billion, or 40%, of its shipping loan book was non-performing and that NordLB wants provisions to cover 50% of NPLs by year-end, vs 44% now, to limit balance sheet risks.

The revelation came amidst a broader warning that NordLB was facing a loss of “more than €1bn” this year, as a result of the latest shoring up of reserves against losses on its portfolio of shipping loans.

NordLB also said it had increased its loan loss provisions by €648m in Q3, having set aside €568m in the second quarter and €435m in the first, and that this had pushed it to a net loss of €330m in the three months to September. The CEO tried to calm the market, saying that the bank's “capital ratios remain at a high level, and have a sufficient buffer to meet all regulatory requirements. That also applies after taking into account the negative result for 2016, and the complete takeover of Bremer Landesbank.”

Total NordLB Loan loss provisions – predominantly in ship financing – surged to €1.65 billion in the first nine months, from €367 million in the same period last year. More than half of that (about €1 billion) falls upon its affiliate Bremer Landesbank which warned in a separate announcement on Thursday that its write-downs on shipping loans would reach €1 billion this year.

In total, Nord LB expects loan loss provisions for the whole group to exceed €2 billion by the end of the year, resulting in a net loss of more than €1 billion. The Q3 loss brought NordLB’s net loss for the first nine months of the year to €736m, down from a net profit of €539m in the same period a year earlier.

NordLB said in April that it intended to cut its portfolio of shipping loans, which stood at €19bn at the beginning of the year, to between €12bn and €14bn by the end of 2018.

The huge write-downs it takes this year pave the way for the planned reduction of its shipping loan book, the bank said. It means that loan accelerations, foreclosures and portfolio sales will not have to cause the bank any more losses, so its restructuring and workout teams can act more flexibly.

The portfolio stands at close to €17bn, however by the end of this year, it is expected to drop to €16 billion if a major portfolio securitisation with PE investor KKR and an unnamed sovereign state fund can be closed.

Meanwhile, as IHS notes, the financial situation at the acquired Bremer Landesbank has become so dramatic that it will have to be fully integrated into Nord LB through signing of a controlling agreement probably at the end of next week.

As explained previously, while in previous years when commodity prices were surging, German bank lending to the shipping industry was a major profit center for many German banks, ever since the financial crisis, and especially following the recent commodity bust, German banks suffered huge losses, as the global shipping industry buckled under the weight of chronic overcapacity, mistimed investments and cooling growth in China.

And, as the FT adds, while there have recently been tentative signs that the brutal market conditions are belatedly spurring consolidation — Japan’s big three shipping conglomerates said last month that they would launch a joint venture for their container shipping businesses — maritime lenders are still suffering. Case in point, the recent unprecedented bankruptcy of South Korean logistics and container transport company Hanjin, whose bankruptcy in the late summer shocked the peace within global supply logistics.

And now that we have a benchmark for just how severe shipping loan deterioration currently is, we wonder just how impaired the loan book at that "other" German lender, Deutsche Bank is. Recall that as also reported in early July, Deutsche Bank was looking to sell at least $1 billion of shipping loans to lighten its exposure to the sector. As Reuters noted then, "banking and finance sources familiar with the matter said Germany's biggest lender was initially looking to offload at least $1 billion.

"They are looking to lighten their portfolio and this includes toxic debt. It makes commercial sense to try and sell off some of their book," one finance source said. "They are not looking to exit shipping."

Assuming DB concluded the sale successfully, it means the largest German bank still has roughly $5 billion in shipping loans on its books: as of July, Deutsche Bank, had between $5 billion and $6 billion worth of total exposure to the shipping sector. Assuming the NordLB's 40% bad debt ratio, it means that Deutsche Bank may have over $2 billion in nonperforming loans on its books. One wonders at what "Mark to Model" value the Frankfurt-based bank is keeping these loans on its books?
Title: Re: Official Shipping Collapse Thread
Post by: MKing on November 24, 2016, 01:49:01 PM
One wonders at what "Mark to Model" value the Frankfurt-based bank is keeping these loans on its books?

I have explained my personal experience with these types of banker shenanigans once before, but I am not certain such direct knowledge is permitted under the rules. But I will try again.

Banks won't do writeoffs in one chunk unless A) they have to or B) there is an ulterior motive, for example, the 2008 market crash is going on, everyone is losing, so you take out the trash because no matter what your stock price is going to take a huge hit regardless. Might as well do some house cleaning.

Prior to a regulatory agency requiring option A) to take effect, this is how it is done. If you have $100 in non-performing assets that must be flushed, you do it a little at a time. You flush $10/qtr out the door for 10 quarters. You offset larger gains with larger writeoffs in any given quarter, perhaps getting rid of $20/qtr when you have a larger than expected gain you can use to mask the write off.

This isn't even a clever big bank technique, the exercise I watched related to oil field equipment and purchasing, using the equipment (as opposed to the commodity revenue) as collateral was a smaller multi-state but not national bank. They washed out tens of millions over the course of just over a year, and by about the 6th quarter announced that their oil field equipment loan business hadn't performed up to expectations, so they were decreasing their exposure and were moving on to loaning to X. They take a modest, short term hit to their value (if any, the bank in question took no hit that I could see in terms of stock value) and move right along to the next adventure.

Tens of millions of dollars in losses in a bank that wasn't all that large, and nobody even blinked. Harder to do when everyone is watching your quarterlys, but when I've worked with CFO's, they have all appeared to be geniuses in hiding these kinds of problems. It nearly requires a CIB problem before the lies are exposed and the place just implodes one afternoon.
Title: Shipbuilding in Japan, Korea, China Collapses in Death Spiral of Orders
Post by: RE on November 27, 2016, 01:44:18 AM
http://wolfstreet.com/2016/11/24/shipbuilding-in-japan-korea-china-collapses-in-death-spiral-of-orders/ (http://wolfstreet.com/2016/11/24/shipbuilding-in-japan-korea-china-collapses-in-death-spiral-of-orders/)

Shipbuilding in Japan, Korea, China Collapses in Death Spiral of Orders
by Wolf Richter • November 24, 2016 • 50 Comments   

“Worse than the one following the Global Financial Crisis.”

New orders received by Chinese shipyards – now infamous for undercutting competitors and sinking into bankruptcy – have plunged 58.5% so far this year through October, compared to last year, according to shipping industry data provider BIMCO, cited by the Nikkei. At South Korean shipyards, which include the three largest in the world, orders have plunged 84.2%; at Japanese shipyards, 90%.

They all focused on large dry-bulk vessels, tankers, and containerships. But this year, orders for tankers globally plunged 80% and for container ships 84%.

Global trade, which collapsed during the Financial Crisis but then recovered in a V-shaped manner, was expected to continue soaring. Instead, it has languished over the past few years. Carriers that transport these goods in dry-bulk vessels, tankers, and container ships, face rampant overcapacity and crushed shipping rates. Smaller ones have sunk. In August, Hanjin, the sixth largest carrier and a formerly too-big-to-fail company in South Korea, was allowed to fail. And they all stopped ordering ships.

However, orders at European shipyards have jumped 45% through the first eight months this year. On the global scale, they’re small players, accounting for only 9.3% of the order book. But they focus on the smaller thriving market for cruise ships, ferries, and tugs.

Globally, orders for ships plunged 77% so far this year through October. But 2015 had already been down 13% from 2014. And 2014 had been down 26% from 2013, the first good year since before the Financial Crisis. In 2007, orders had peaked at 92 million compensated gross tons (CGT). So far this year, orders are down to 10 million CGT.

At this rate, 2016 will be the worst year in BIMCO’s data series going back to 1996. Even back then, orders amounted to 18 million CGT.

No industry can survive for long when orders collapse at these rates. But next year might be worse, according to Peter Sand, BIMCO’s chief shipping analyst. For the Asian shipbuilders concentrated in the container, dry-bulk or offshore segments, “there is a possibility for postponements and cancellations.” Outright cancellations are bad enough. But “postponements can add a further headache to the shipyards’ liquidity, as the final payments in these cases may be delayed.”




Among the collapsed shipbuilders is South Korea’s STX Offshore & Shipbuilding, which filed for court protection in May. No country is more dependent on shipbuilding than South Korea: it accounted for 7.1% of manufacturing jobs in 2015.

Korea’s Big Three – Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering, and Samsung Heavy Industries – have been dumping noncore assets and shedding employees as part of prior creditor-led restructuring plans. Even that wasn’t enough. At the end of October, the government announced a bailout plan: it would order 250 vessels through 2020, valued at $9.6 billion, but they’ll be smaller ships and boats, not the big, former money-makers that these shipyards really need.

That may not be enough either. On November 15, Hyundai Heavy announced it would sell its non-shipbuilding businesses, including utilities, construction equipment manufacturing, and robotics, to get out from under its suffocating load of debt. Samsung Heavy said it would lay off 30% to 40% of its 14,000 employees by 2018. Daewoo Shipbuilding said it would lay off 20% of its employees by 2020.

In China, bankruptcies are piling up. In April and May:  Zhong Chuan Heavy Industry, Zhong Chuan Heavy Industry Equipment, Zhoushan Xuhua Metal Material, Zhenjiang Shipbuilding (subsidiary of Sinopacific Shipbuilding Group), and Yangzhou Dayang Shipbuilding. Plus, in February, state-owned Sainty Marine; in December 2015, state-owned Wuzhou Shipyard; and earlier in 2015, privately owned Mingde Heavy Industries.

But many of these failed shipbuilders, propped up by state-owned lenders, continue to exist and get orders by undercutting prices and producing below production costs. They’re called zombies.

In October, Guo Dacheng, chairman of the China Association of the National Shipbuilding Industry, said that these zombies should be quickly weeded out, according to the Nikkei; they were damaging the entire industry.

To say alive, other shipbuilders are diversifying away from dry-bulk carriers and container ships; they’re now trying to muscle in on European shipyards by building ferries and cruise ships. If they do this successfully, they’ll create the next glut and collapse.

It won’t be easy. Japan’s big shipbuilders are already trying to diversify into cruise ships, but that hasn’t worked out very well yet. The Nikkei:

    After a pause of around a decade, Mitsubishi Heavy Industries restarted building large passenger ships in 2013, a more lucrative segment than container ships. However, the company indicated in October that its Nagasaki Shipyard & Machinery Works unit had lost more than 250 billion yen ($2.25 billion) on an order from a U.S. cruise line for two vessels amid repeated design changes and costs from importing European equipment.

    As a consequence, Mitsubishi said in October that it will only accept orders from hereon for smaller passenger vessels while seeking more orders for LNG carriers.

So now, the big Japanese shipbuilders are trying to stay alive by consolidating. Imabari Shipbuilding (5th largest in the world), Oshima Shipbuilding, and Namura Shipbuilding all specialize in dry-bulk carriers. Now they’re in discussions with Mitsubishi Heavy about putting their resources together and get into cruise ships. Combined, they’d make the second largest shipbuilder in the world, if they all survive long enough to get out of this slump.

It could take a while. “The industry won’t recover until 2021,” explained Yoshikazu Nakaya, a shipping analyst with Mizuho Bank. He called the fiasco “worse than the one following the Global Financial Crisis.”

The US is the largest destination for global goods. But the next brake shoe is about to drop. The “Car Recession” is now expected to spread to 2017. Read…  Strongest Pillar of Shaky US Economy has Cracked
Title: Is our atmospheric pollution problem only because of the Carz?
Post by: RE on March 13, 2017, 06:32:02 AM
Steve often cites carz as the #1 polluter and cause of our economic problems, but they are really only a part of the problem.  A big part for sure, but there's tons of shit we depend on economically besides carz coughing up puke into the atmosphere.

Quote
By burning heavy fuel oil, just 15 of the biggest ships emit more oxides of nitrogen and sulphur—gases much worse for global warming than carbon dioxide—than all the world’s cars put together.

RE

http://www.economist.com/news/finance-and-economics/21718519-new-ways-foot-hefty-bill-making-old-ships-less-polluting-green-finance (http://www.economist.com/news/finance-and-economics/21718519-new-ways-foot-hefty-bill-making-old-ships-less-polluting-green-finance)

Light at the end of the funnelGreen finance for dirty ships

New ways to foot the hefty bill for making old ships less polluting
From the print edition | Finance and economics
Mar 9th 2017

(http://cdn.static-economist.com/sites/default/files/imagecache/full-width/images/print-edition/20170311_FNP001_0.jpg)

SHIPPING may seem like a clean form of transport. Carrying more than 90% of the world’s trade, ocean-going vessels produce just 3% of its greenhouse-gas emissions. But the industry is dirtier than that makes it sound. By burning heavy fuel oil, just 15 of the biggest ships emit more oxides of nitrogen and sulphur—gases much worse for global warming than carbon dioxide—than all the world’s cars put together. So it is no surprise that shipowners are being forced to clean up their act. But in an industry awash in overcapacity and debt, few have access to the finance they need to improve their vessels. Innovative thinking is trying to change that.

A new report from the Carbon War Room (CWR), an international NGO, and UMAS, a consultancy, highlights the threat that new environmental regulations pose to the industry. The International Maritime Organisation, the UN’s regulatory agency for shipping, has agreed to cap emissions of sulphur from 2020. Last month the European Parliament voted to include shipping in the EU’s emissions-trading scheme from 2021. Without any retrofitting of ships to meet the new rules, many firms may be forced out of business. That also imperils banks across the world, which have lent $400bn secured on smoke-spewing ships.

Tens of billions of dollars are needed to pay for upgrades to meet the new rules, according to James Mitchell at CWR. But the industry can hardly pay even its existing debts. Freight rates have collapsed owing to a slowdown in world trade since the financial crisis and to enormous overcapacity. An earnings index compiled by Clarksons, a research firm, covering the main vessel types (bulk carriers, container ships, tankers and gas transporters), touched a 25-year low in 2016. Banks do not want to throw good money after bad.

Even those that are expanding their ship-lending have seen less demand than they expected for retrofit loans. ABN AMRO, a Dutch bank, and a market leader in this business, has made less than $500m in green loans over the past five years, says Gust Biesbroeck, its head of transportation finance. The problem, he adds, is one of incentives. Ship owners, who would normally borrow for such upgrades, do not benefit from lower fuel bills. It is the firms chartering the vessels that enjoy the savings. But their contracts are not long enough to make it worthwhile to invest in green upgrades. The average retrofit has a payback time of three years, whereas 80% of ship charters are for two years or less.

Hence the interest in new green-lending structures. One, called “Save as you Sail”, comes from the Sustainable Shipping Initiative, another NGO. The idea is to share the fuel savings between the shipowner and the charterer over a longer contract, giving both an incentive to make the upgrades. Such schemes used to be thwarted by the difficulty of measuring exact fuel consumption on ships. New technologies allow more accurate readings.

Finance providers are keen to get involved. Last June the European Investment Bank announced €250m ($282m) in funding for such retrofits; it hopes other banks will follow suit with billions more. In future, the idea might be extended to greening aircraft and trains. For now these businesses do not suffer a shortage of finance. But a downturn is a matter of “when not if”, says Michel Dembinski at MUFG, a bank. Green finance could rescue many other industries sailing into a storm.
Title: Yo Ho Ho and a Bottle of Rum...The Somali Pirates are BACK!
Post by: RE on March 14, 2017, 06:11:15 AM
http://www.youtube.com/v/a5V5C8mEVzY

RE

http://www.bbc.com/news/world-africa-39264343 (http://www.bbc.com/news/world-africa-39264343)

Somali pirates suspected of first ship hijacking since 2012

    1 hour ago
    From the section Africa

(http://ichef-1.bbci.co.uk/news/660/cpsprodpb/13D48/production/_95142218_mediaitem95142217.jpg)
The Sri Lankan-flagged tanker was sailing to Mogadishu
Image copyright Mohamed Deeq - SBC

An oil tanker has been hijacked by suspected pirates off the coast of Somalia, reports say, the first such hijacking in the region in five years.

The ship sent a distress signal on Monday evening, saying it was being approached by high-speed boats.

The gunmen have told a local official they are fishermen whose equipment was destroyed by illegal fishing vessels.

Piracy was rampant off the Somali coast until increased patrols by European naval forces contained the problem.

The vessel was en route from Djibouti to the Somali capital, Mogadishu, and was then diverted towards the port of Alula in the semi-autonomous region of Puntland.

Its tracking system has reportedly been switched off.

The Sri Lankan Foreign Ministry has confirmed that eight of its nationals were on board.

    More on this and other African stories
    Somalia warns of return to piracy
    Somali piracy: A broken business model?

Ali Shire Mohamud Osman, the district commissioner in the town of Alula, near where the ship has been taken, told the BBC he was trying to find out if the gunmen really were fishermen or were organised pirates.

"The men who are holding it claim that they are fishermen who suffered from the illegal fishing in the area. However, if we confirm that they are pirates, I will ask them to leave the area immediately. Otherwise, we will see how we can save the vessel," he said.

The vessel was carrying oil and was owned by the United Arab Emirates (UAE), despite conflicting reports over the flag it was sailing under, he added.

The chairman for Puntland's anti-piracy agency, Abdirizak Mohamed Dirir told the BBC the attack could be linked to illegal fishing along Somalia's coast.

"Incidents of piracy have reduced. However, we cannot ignore the problems caused illegal fishing on our shores; regardless who is involved and where they are from, it's something we have been complaining about for so long," he said.
Image copyright European Union Naval Force
Image caption The European Union Naval Force has been running operations off Somalia since 2008 to combat piracy

The European Union Naval Force, which runs anti-piracy operations in the area, said it was too early to confirm pirate involvement.

It has sent a plane to the area to investigate.

Eight people are believed to have been on board the ship, which can carry almost 12,000 tonnes of cargo.

John Steed of the aid group Oceans Beyond Piracy, speaking to Reuters news agency, said, "The ship reported it was being followed by two skiffs yesterday afternoon. Then it disappeared."

Piracy off the coast of Somalia, usually for ransom, has reduced significantly in recent years, in part because of extensive international military patrols as well as support for local fishing communities.

At the height of the crisis in 2011, the annual cost of piracy was estimated to be up to $8bn (£7bn).

However, some smaller fishing vessels have recently been seized in the area.

In 2015, Somali officials warned that piracy could return unless the international community helped create jobs and security ashore, as well as combating illegal fishing at sea.

Some Somali fishermen turned to piracy after their livelihoods were destroyed by illegal fishing from foreign trawlers, who benefited from the lack of a functioning coastguard in the country following years of conflict.
Title: Health risks of shipping pollution have been 'underestimated'
Post by: RE on December 08, 2017, 04:41:56 AM
https://www.theguardian.com/environment/2009/apr/09/shipping-pollution (https://www.theguardian.com/environment/2009/apr/09/shipping-pollution)

 Health risks of shipping pollution have been 'underestimated'
One giant container ship can emit almost the same amount of cancer and asthma-causing chemicals as 50m cars, study finds

• Climate change threatens 50 years of progress in global health, study says

(https://i.guim.co.uk/img/static/sys-images/Sport/Pix/pictures/2009/3/12/1236849568292/A-cargo-ship-001.jpg?w=620&q=55&auto=format&usm=12&fit=max&s=c343e67de1848d24d213c985fe752bc2)
90,000 cargo ships travel the world's oceans. Photograph: Peter Maenhoudt/AP

John Vidal, environment editor

Thursday 9 April 2009 10.50 EDT
First published on Thursday 9 April 2009 10.50 EDT


Britain and other European governments have been accused of underestimating the health risks from shipping pollution following research which shows that one giant container ship can emit almost the same amount of cancer and asthma-causing chemicals as 50m cars.

Confidential data from maritime industry insiders based on engine size and the quality of fuel typically used by ships and cars shows that just 15 of the world's biggest ships may now emit as much pollution as all the world's 760m cars. Low-grade ship bunker fuel (or fuel oil) has up to 2,000 times the sulphur content of diesel fuel used in US and European automobiles.

Pressure is mounting on the UN's International Maritime Organisation and the EU to tighten laws governing ship emissions following the decision by the US government last week to impose a strict 230-mile buffer zone along the entire US coast, a move that is expected to be followed by Canada.

Guardian Today: the headlines, the analysis, the debate - sent direct to you
Read more

The setting up of a low emission shipping zone follows US academic research which showed that pollution from the world's 90,000 cargo ships leads to 60,000 deaths a year and costs up to $330bn per year in health costs from lung and heart diseases. The US Environmental Protection Agency estimates the buffer zone, which could be in place by next year, will save more than 8,000 lives a year with new air quality standards cutting sulphur in fuel by 98%, particulate matter by 85% and nitrogen oxide emissions by 80%.

The new study by the Danish government's environmental agency adds to this picture. It suggests that shipping emissions cost the Danish health service almost £5bn a year, mainly treating cancers and heart problems. A previous study estimated that 1,000 Danish people die prematurely each year because of shipping pollution. No comprehensive research has been carried out on the effects on UK coastal communities, but the number of deaths is expected to be much higher.

Europe, which has some of the busiest shipping lanes in the world, has dramatically cleaned up sulphur and nitrogen emissions from land-based transport in the past 20 years but has resisted imposing tight laws on the shipping industry, even though the technology exists to remove emissions. Cars driving 15,000km a year emit approximately 101 grammes of sulphur oxide gases (or SOx) in that time. The world's largest ships' diesel engines which typically operate for about 280 days a year generate roughly 5,200 tonnes of SOx.

The EU plans only two low-emission marine zones which should come into force in the English channel and Baltic sea after 2015. However, both are less stringent than the proposed US zone, and neither seeks to limit deadly particulate emissions.

Shipping emissions have escalated in the past 15 years as China has emerged as the world's manufacturing capital. A new breed of intercontinental container ship has been developed which is extremely cost-efficient. However, it uses diesel engines as powerful as land-based power stations but with the lowest quality fuel.

"Ship pollution affects the health of communities in coastal and inland regions around the world, yet pollution from ships remains one of the least regulated parts of our global transportation system," said James Corbett, professor of marine policy at the University of Delaware, one of the authors of the report which helped persuade the US government to act.

Today a spokesman for the UK government's Maritime and Coastguard Agency accepted there were major gaps in the legislation. "Issues of particulate matter remain a concern. They need to be addressed and we look forward to working with the international community," said environment policy director Jonathan Simpson.

"Europe needs a low emission zone right around its coasts, similar to the US, if we are to meet health and environmental objectives," said Crister Agrena of the Air Pollution and Climate Secretariat in Gothenburg, one of Europe's leading air quality organisations.
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"It is unacceptable that shipping remains one of the most polluting industries in the world. The UK must take a lead in cleaning up emissions," said Simon Birkett, spokesman for the Campaign for Clean Air in London. "Other countries are planning radical action to achieve massive health and other savings but the UK is strangely inactive."

The calculations of ship and car pollution are based on the world's largest 85,790KW ships' diesel engines which operate about 280 days a year generating roughly 5,200 tonnes of SOx a year, compared with diesel and petrol cars which drive 15,000km a year and emit approximately 101gm of SO2/SoX a year.
Shipping by numbers

The world's biggest container ships have 109,000 horsepower engines which weigh 2,300 tons.

Each ship expects to operate 24hrs a day for about 280 days a year

There are 90,000 ocean-going cargo ships

Shipping is responsible for 18-30% of all the world's nitrogen oxide (NOx) pollution and 9% of the global sulphur oxide (SOx) pollution.

One large ship can generate about 5,000 tonnes of sulphur oxide (SOx) pollution in a year

70% of all ship emissions are within 400km of land.

85% of all ship pollution is in the northern hemisphere.

Shipping is responsible for 3.5% to 4% of all climate change emissions

• This article was amended on 25 August 2015 to correct the number of deaths per year attributed to pollution from the world's 90,000 cargo ships.
Topics

    Travel and transport

    Greenhouse gas emissions
    Health
    Pollution
    Asthma
    Water transport
    news

Title: 🚢 “Bunker,” the Fuel for the Giant Engines in Large Cargo Ships
Post by: RE on June 04, 2018, 02:50:48 AM
https://wolfstreet.com/2018/06/03/bunker-the-fuel-for-the-giant-engines-in-large-cargo-ships/ (https://wolfstreet.com/2018/06/03/bunker-the-fuel-for-the-giant-engines-in-large-cargo-ships/)

“Bunker,” the Fuel for the Giant Engines in Large Cargo Ships
by MC01 • Jun 3, 2018 • 18 Comments   
The world grapples with the emissions.
By MC01, a frequent commenter on WOLF STREET:

(https://www.worldoiltraders.com/wp-content/uploads/2016/09/Bunker_Fuel_d6.jpg)

When pricing a container shipment, we are sometimes told rates have gone up because “bunker oil” has increased in price or that the delivery will take a few extra days because shipowners ordered their skippers to slow down to save “bunker oil.”

But what is this “bunker oil”?

The term “bunker oil” defines all types of fuel used by the shipping industry and generally speaking can be split in two categories: distillates and residuals.

Distillates are produced during fractional distillation of crude oil and generally are very close in density to diesel #2, the mainstay fuel in trucking and agriculture, but slighter denser.
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Residuals are produced from the thick sludge left over at the bottom of the refinery’s fractionating column and are only a step or two removed from bitumen, the stuff used to pave roads: the most widespread types of residual bunker available have densities ranging from 500 to 700cSt at room temperature. For comparison, the densest types of diesel fuel have a density of under 35cSt at room temperature. This means that this type of bunker has to be pre-heated before it can be pumped into the fuel system.

There are also several blends of distillates and residuals, or of various residuals, whose density ranges from 300 to 400 cSt, which are sold to provide a cheap alternative to straight diesel fuel while at the same time helping to meet environmental legislation.

Pollution by maritime vessels is regulated worldwide by the International Convention for the Prevention of Pollution from Ships (MARPOL), first ratified in 1973, and regularly amended over the years, the last time in 2013.

The MARPOL protocol legislates all aspects of ship-related pollution, from emission levels to how waste from the ship latrines should be processed and disposed of (not a joke when modern cruise ships are involved).

Emissions in particular have long focused on sulfur oxides. As with all fossil fuels, the trend has long been towards lower and lower sulfur content. But instead of focusing on emissions themselves, the MARPOL protocol legislates the limit of sulfur in bunker oil, and in such bizarre fashion it deserves a mention.

While there exists an ISO standard for bunker oil (ISO:8217, last revised in 2017), it’s not considered binding by MARPOL, which instead relies on the International Maritime Organization (IMO) to sample bunker oil sold in several locations worldwide and coming up with a “worldwide average” which is just that. Presently the limit for this “worldwide average” is 4.5% sulfur content.

This helps explain why worldwide consumption of residual fuels (as defined by the US Department of Energy) has been steadily declining after peaking in 1991. Latest data put daily worldwide consumption at 8,320 barrel per day, down 4,000 barrels per day from the 1991 peak.

When the MARPOL protocol relating to sulfur content was being discussed, several countries expressed concerns about its standards not being strict enough. To appease them, the concept of Environmental Control Areas (ECA’s) was introduced. ECA’s are areas coinciding with the territorial waters of EU member countries, Norway, Iceland and the United States (plus US dependencies in the Caribbean) where ships must use low-sulfur fuel, meaning bunker oil with less than 1% sulfur content.

In addition, the Chinese government has unilaterally created three ECA’s: One around Hong Kong and the Pearl River Delta, one around the estuary of the Yangtze River, and one largely coinciding with the Bohai Gulf. These three ECA’s include seven of the ten busiest ports worldwide.

Starting in 2000, ships sailing through these ECA’s have to comply with another set of emission rules collectively known as Regulation 13, which limit air polluting nitrogen oxides (NOx) emissions.

Regulation 13 is divided in three Tiers: Tier I, for ships built starting January 1, 2000, Tier II for ships built starting January 1, 2011, and Tier III for ships built starting January 1, 2016.

Each Tier is further divided in categories according to engine rotation speed. Low speed engines, the kind used in the large commercial vessels, have deceptively high limits: for example Tier III defines the NOx limit for engines up to 129 rpm as 3.4g/kWh while engines in the 130-1,999 rpm class have an emission limit of 2.4g/kWh.

However these low speed engines tend to run on much “dirtier” (meaning with a high organic nitrogen content) fuels than high speed ones for economic considerations, meaning they require even more work from engine manufacturers to provide engines the shipping industry can use worldwide.

Stricter environmental legislation around the world is only part of the increasingly more challenging environment these engine manufacturers have to deal with. There are only three that make the giant low-speed two-stroke diesel engines used in the largest container ships, bulk carriers, and tankers: MAN SE of Germany, Mitsubishi Heavy Industries of Japan, and Wärtsilä of Finland. Read…  The Engines of the Largest Container Ships in the World, and Challenges their Manufacturers Face
 
Title: World’s Largest Shipping Company Collapses As Trade War Reality Strikes
Post by: azozeo on July 16, 2018, 09:57:16 AM
While US equity markets (well a few mega-cap tech stocks anyway) have remained resilient in the context of rising protectionist fears, the world’s largest shipping company is seeing its stock eviscerated as investor anxiety over trade wars finds an outlet that makes rational sense.

A.P. Moeller-Maersk A/S may struggle to make a profit this year after the U.S. and China descended into a trade war that is already showing stress in sentiment surveys.

As Bloomberg reports, Maersk, which is based in Copenhagen, has already lost almost a third of its market value this year as investors gird for more bad news, and it is losing value in line with the collapse in the US Treasury yield curve.

Trade protectionism means less demand, and history suggests the shipping industry will struggle to make the necessary supply cuts. What’s more, Maersk is now more exposed to shipping as the former conglomerate divests its energy business.


https://www.zerohedge.com/news/2018-07-13/worlds-largest-shipping-company-collapses-trade-war-reality-strikes (https://www.zerohedge.com/news/2018-07-13/worlds-largest-shipping-company-collapses-trade-war-reality-strikes)
Title: Re: World’s Largest Shipping Company Collapses As Trade War Reality Strikes
Post by: Surly1 on July 16, 2018, 10:15:54 AM
While US equity markets (well a few mega-cap tech stocks anyway) have remained resilient in the context of rising protectionist fears, the world’s largest shipping company is seeing its stock eviscerated as investor anxiety over trade wars finds an outlet that makes rational sense.

A.P. Moeller-Maersk A/S may struggle to make a profit this year after the U.S. and China descended into a trade war that is already showing stress in sentiment surveys.

As Bloomberg reports, Maersk, which is based in Copenhagen, has already lost almost a third of its market value this year as investors gird for more bad news, and it is losing value in line with the collapse in the US Treasury yield curve.

Trade protectionism means less demand, and history suggests the shipping industry will struggle to make the necessary supply cuts. What’s more, Maersk is now more exposed to shipping as the former conglomerate divests its energy business.


https://www.zerohedge.com/news/2018-07-13/worlds-largest-shipping-company-collapses-trade-war-reality-strikes (https://www.zerohedge.com/news/2018-07-13/worlds-largest-shipping-company-collapses-trade-war-reality-strikes)

Hanjin and Dalian had already declared bankruptcy. This causes increasing consternation where I live because I could walk to the Port of Virginia from where I live, if I could still walk (much). Long trains of containers are standing on sidings, and they are being added to regularly. This complicates what are becoming very long traffic jams caused by trains entering the port slowly. I suspect the Port is rapidly running out of container storage space. A lot of goods are now stranded on sidings.

Then throw this item on the pile:

China-U.S. ocean freight rates have fallen for the 32nd straight week (https://www.freightwaves.com/news/economics/china-us-ocean-freight-rates-have-fallen-for-the-32nd-straight-week-freightos-report)

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China-U.S. ocean freight rates have fallen for the 32nd straight week: Freightos Report

 (Photo: Pexels)

(PHOTO: PEXELS)

Data gathered from aFreightos reportshows that the China-U.S. ocean rates have been hitting noticeable lows from the start of this year. The fall in prices is even more relevant when compared with the prices that held up last year - year-on-year rates have been falling for the 32nd straight week. The current rate of the China-U.S. West Coast is 26% lower compared to 2017, and the China-U.S. East Coast has recorded a 19% lower rate against last year.

Though the gap between the prices reduced during this February, the Chinese New Year had its toll on the freight pricing sinking it by $600 per FEU in the China-U.S. West Coast. A week before the Chinese New Year, the rates were at a $1412 per FEU precipice, falling dramatically to $812 per FEU in a month.

Eytan Buchman, the VP of Marketing at Freightos, explained that this trend is heavily dependant on seasonality. As is visible from the range, the prices went up for a month before the new year, with companies rushing to flush out their inventories and reach retailers before the new year’s onset. As this led to a massive supply and inadequate capacity situation, the rates kept climbing till the new year, after which it fell back to a rate which is comparable to the rates of the previous month.

But the steady decline in ocean freight rates for over six months year-on-year is a problem. “The problem with the ocean freight trend is still about going back to the underlying industry issue, which is over capacity. There is too much ocean freight capacity and a lot less shipments being pushed out,” said Buchman. “If you look at air freight, prices have been very strong. While with air freight, there is a certain amount of support from the e-commerce boom, ocean freight’s underlying supply and demand trends just point that overcapacity is something that continues to impact the market.”

China-U.S. air freight rates have been steadily increasing all year, starting at $1.15/kg at the end of January to $1.65/kg in March and now at $1.85/kg in April. The higher rates are attributed to limited capacity on Europe-U.S. flights and also to the Euro relatively weakening out against the USD, when considering its meteoric rise a few months back.

But as Buchman agreed, the impact that e-commerce has in determining air freight prices cannot be discounted. “Supply chains are more complex today with more specifics and volatile sourcing, which makes air freight a necessity. It is not that ocean freight can’t provide that, it is just that in order to get that, we need accuracy with ocean freight and companies need to plan better and in advance on where and when you need inventories,” he said.

This trend helps larger and more sophisticated companies to leverage ocean freight and cut transport costs by intricately handling their supply chains. “These companies split their cargo and send some of it by air freight and send the remaining by ocean freight in order to balance their inventory,” said Buchman.

Alphaliner, a shipping data analytics firm predicts that the ocean freight rates would fall as we go further along as it sees an 8% increase in capacity by July. The reason for ocean freight rates decline rests squarely on the shoulders of large shipping companies, which are relentlessly working towards increasing capacity while demand continues to scratch the surface. New services have been announced by South Korea’s SM Line and APL, while the Ocean Alliance is anticipated to scale up capacity by around 10% this year.

Though volumes do increase year-on-year, the capacity growth is hardly proportional which might help the cause of shippers who are now in the position to dictate rates. Though prices have not hit rock-bottom, it still is low enough to be of concern to carriers and predicting the future accurately seems to be an improbable task.

“It is always difficult to project with any accuracy, but based on previous trends I can’t imagine freight prices climbing too high. We can anticipate stable ocean rates for now,” said Buchman. “The kind of situation we are in, is similar to the time before Hanjin declared bankruptcy in September 2016. You are looking at a situation where there is too much supply and not enough demand to go with driving profitable unit economics for carriers.”

Nonetheless, the General Rate Increase (GRI) seems to be holding up, as the ocean freight rates have not seen landslide declines this week, as rates dropped by 2% in the East Coast and by 5% in the West Coast compared to last week. This could be a saving grace for carriers heading into contract negotiations - for instance, Maersk has gone ahead and announced a contract increase for customers with service contract rates expiring on April 14. Other carriers are following suit and have announced GRIs for both April 15 and May 1.

Stay up-to-date with the latest commentary and insights on FreightTech and the impact to the markets by subscribing.

Title: Re: Official Shipping Collapse Thread
Post by: azozeo on July 16, 2018, 10:20:03 AM
Union Pacific & BNSF have side spurs all over this desert with loco's & miles of flat cars with empty sea containers.

I believe I know why the push is on out here to expand the rail lines. Yucca, Az. is due to boom because BNSF & W/M both
want additional warehouse space & more side spurs.
Title: 🚛 The Trucking Boom Ends
Post by: RE on December 16, 2018, 12:39:54 AM
https://wolfstreet.com/2018/12/15/trucking-boom-ends-class-8-orders-freight-shipment-volume/ (https://wolfstreet.com/2018/12/15/trucking-boom-ends-class-8-orders-freight-shipment-volume/)


The Trucking Boom Ends


The Trucking Boom Ends

But no letup in freight rates yet.

In November, according to transportation data provider FTR, orders for new Class-8 trucks — the heavy trucks that haul the products of the goods-based economy across the US — plunged nearly 50% from July and August, 35% from October, and 15% from November 2017, to 27,500 orders, the lowest all year.

This chart shows the percent change of Class-8 truck orders for each month compared to the same month a year earlier, which eliminates the effects of seasonality:

Red-hot demand for transportation services this year and late last year, especially by truck, caused shortages, spiking freight rates, shipping delays, and more gray hair among shippers, while truckers were scrambling to order new trucks to meet the demand, and truck makers, swamped with orders saw their backlog balloon to 11 months, and records were broken on a monthly basis. But suddenly the hot air is hissing out of the market.

The chart above shows just how cyclical this business is:

  1. The effects of the “transportation recession” on Class-8 truck orders in 2015 and 2016 when orders collapsed to the lowest level since 2009, triggering layoffs at truck and engine makers;
  2. The blistering boom in orders leading to record backlog for truck makers, amid component shortages and supply-chain bottlenecks;
  3. And now the beginning of the next phase in the cycle.

Truck makers aren’t going to hurt just yet. Over the past 12 months, Class-8 truck orders have reached nearly 500,000 according to FTR data. Truck makers are running at capacity, building trucks at an annual rate of about 320,000 units. Some cancellations have started to come in, but the backlog extends way into next year. The chart below shows that orders in November plunged from the super high levels that had peaked in July and August at 52,000, but were still above the levels of the transportation recession:

“27,500 is not that bad of a number,” said Don Ake, FTR vice president of commercial vehicles.

Truckers were motivated to put in these record orders earlier this year because freight demand had been enormous, and there wasn’t enough equipment to move it, and they were able to raise rates and make more money. Now they see demand backing off, and overcapacity, created during boom times is precisely why this industry is so cyclical.

And growth of demand for transportation is now stalling. Freight shipment volume across all modes of transportation – truck, rail, air, and barge – was essentially flat in November compared to November 2017, and about flat with November 2014 (the other recent banner year), according to the Cass Freight Index. This year-over-year no-growth is down from growth in the double-digits earlier this year. The index covers merchandise for the consumer and industrial economy but does not include bulk commodities, such as grains or chemicals:

The chart above shows just how powerful the boom in late 2017 and in the first three quarters of 2018 had been. Note the seasonal drops starting in October every year – except in 2017 (red line). This was the beginning of the boom that has now run its course, with shipments still strong, but flat with November 2017 and November 2014.

Demand for transportation from the industrial sector is reflected in demand for flatbed trailers that haul equipment and supplies for manufacturing, oil-and-gas drilling, construction, etc. Demand for flatbed trailers too surged late last year, but capacity suddenly tightened in January 2018 in part due to the newly required use of Electronic Logging Devices (ELDs).

As a result, the DAT Flatbed Monthly Barometer, which tracks demand-capacity imbalances, spiked to historic highs. But the indicator, cited by Cass in its report, has now plunged back closer to earth. The horizontal blue line (=50) indicates that supply and demand for flatbed trailers are in balance. So for now there is still slightly more demand for flatbed trailers than supply, with the indicator being above 50, but a far cry from the historic spike earlier this year (click to enlarge):

But freight rates and fuel surcharges have shown no signs of backing off just yet, as price pressures continue.

The average price of diesel at the pump, according to EIA data, has been edging back down ever so reluctantly from the cycle peak in October ($3.40 a gallon), despite the 30% plunge in the price of crude oil since then. At $3.16 a gallon, the average retail price of diesel is still up 8.6% from a year ago:

And freight rates are still hot. The total amount companies spent on shipping their merchandise via all modes of transportation – by truck, rail, air, and barge – rose 8.4% in November compared to a year ago. This is a result of flat shipment volumes but at higher prices that continue to squeeze the margins of shippers. But that 8.4% increase was a far cry from the year-over-year growth of freight expenditures between 12% and 19% in the prior 12 months:

The chart above also shows just how massive the boom has been and how sharp the wind-down now is. At the moment – if the wind-down doesn’t go much further – it means a return to something perhaps considered “normal,” a reversion to the mean, if you will. But the industry is known for its wild cyclicality.

It now faces a mind-boggling build-up of businesses inventories around the country that in part has powered the transportation boom over the past year-and-a-half. But business, as they invariably do, will sooner or later deal with these inventories to trim them back down, which will entail less demand for transportation services. And a classic overshoot on the way down for demand in the transportation sector, as we have seen during the last transportation recession, would then be on the schedule for sometime next year.

Title: 🛢️ Oil Industry Faces $1 Trillion Challenge
Post by: RE on December 18, 2018, 03:58:24 AM
https://oilprice.com/Energy/Energy-General/Oil-Industry-Faces-1-Trillion-Challenge.html

Oil Industry Faces $1 Trillion Challenge
By Irina Slav - Dec 17, 2018, 4:00 PM CST

(https://d32r1sh890xpii.cloudfront.net/article/718x300/7bc41320a24bd307acf380bad313eeee.jpg)

When the International Maritime Organization announced it would introduce a new, lower, sulfur emission ceiling for bunkering fuel, many in the energy industry worried that demand for high-sulfur fuel oil would suffer a blow from which it would not be able to recover. But then scrubbers—equipment that strips sulfur from bunkering fuel—were floated as a relatively easy to deploy alternative to switching to low-sulfur fuel. Now, however, scrubbers’ future is questionable.

S&P Global Platts reported recently that at a maritime industry event, the MARE Forum in Houston, scrubbers had garnered significant attention, and this attention had not been particularly positive.

A little over 1,500 vessels have been fitted with sulfur scrubbers as of October this year, according to the senior vice president of engineering and technology at the American Bureau of Shipping. By January 2020, when the new emission rules come into effect, the number of scrubbers both installed and ordered would reach 2,278, S&P Global Platts has calculated. And all these vessels will be producing sulfur acid-rich wastewater from the scrubbers and will need high-sulfur fuel.

One port, Singapore, has already banned the discharge of wastewater from vessels fitted with sulfur scrubbers. Chances are it won’t remain the only one. But there’s more. Singapore’s Port Authority also introduced a requirement that all vessels calling at the port should use 0.5-percent sulfur fuel. Again, Singapore is by far not the only port setting new fuel requirements for vessels in compliance with the IMO rules.

So, these 1,500 (and counting) vessels that already sport scrubbers or are to get one in the next year, will not just have to find a way to dispose of their wastewater without violating port regulations, but they will also need that high-sulfur fuel that the scrubbers scrub, and that will be less available after the 2020 rules kick in as most ports are preparing to offer the new, compliant fuel. In other words, scrubber-fitted vessels are facing a complex situation: not enough high-sulfur fuel and unfriendly port authorities banning the discharge of wastewater from these scrubbers.
Related: The U.S. Oil Industry’s Dirty Little Secret
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But they could just load on low-sulfur fuel, right? They sure could, but that would kind of make the investment in a scrubber meaningless. According to the chief executive of the Chamber of Shipping of America, Cathy Metcalf, the payoff period for a scrubber ranges between half a year and three and a half years. But if the vessel owners are forced to pay for costlier low-sulfur bunkering, then this period would likely extend.

As if that’s not enough problems already, some of the delegates at the MARE Forum warned that the scrubbers did not, in fact, reduce a vessel’s overall emissions because of the additional energy needed to scrub the sulfur from the fuel. When stricter environmental rules are enforced in the near future, this will also affect the benefits of opting for scrubbers instead of low-sulfur fuel.

The head of S&P Global Platts Analytics, Chris Midgley, said in September that the new rules will have an impact worth US$1 trillion on the energy industry over a period of five years as well as reverberations across many other industries. Vessel owners might want to think well before opting for scrubbers lest they end up costing them more, rather than less than switching to a more expensive fuel.

By Irina Slav for Oilprice.com
Title: 🚛 Phenomenal Trucking Boom Ends, Trucking Bust Starts
Post by: RE on February 08, 2019, 02:56:54 AM
Wonder how LD's trucking company is doing?

RE

https://wolfstreet.com/2019/02/06/trucking-boom-turns-to-trucking-bust/

Phenomenal Trucking Boom Ends, Trucking Bust Starts
by Wolf Richter • Feb 6, 2019 • 44 Comments   
So that U-turn was fast, even for the legendarily cyclical trucking business.

In January, orders for Class-8 trucks — the heavy trucks that haul trailers with goods of all kinds across the US — plunged by 58% from a year ago, to just 15,642 orders. It was the lowest number or orders since October 2016, toward the end of the “transportation recession” when Class-8 truck orders had plunged to the lowest levels since 2009, and truck and engine manufacturers responded with layoffs.

The chart below shows the percent change of Class-8 truck orders for each month compared to the same month a year earlier, which eliminates the effects of seasonality. The year-over-year plunges in December and January are on par with happened during the last transportation recession (data via transportation data provider FTR):

(https://wolfstreet.com/wp-content/uploads/2019/02/US-class-8-truck-orders-yoy-change-2019-01.png)

In the chart above, also note the blistering boom in orders in 2017 and 2018, when demand for transportation services soared, and trucking companies that found themselves short on equipment went on an ordering binge, trying to be the first to get their orders into the system. This historic explosion in orders led to a record backlog for truck makers and their suppliers.

Then, in this viciously cyclical industry, the cycle progressed to the next phase, with demand for transportation services returning to normal-ish levels, even as capacity was rising, and truckers slashed their orders for new equipment.

The chart below of the number of orders for Class-8 trucks every month shows how far these orders have dropped, from over 50,000 each in July and August to 15,642 in January:

(https://wolfstreet.com/wp-content/uploads/2019/02/US-class-8-truck-orders-2019-01-.png)

It was, however, a predictable U-Turn. Following the August 2018 data, I asked at the time, When will the biggest-ever boom end? And I cautioned that this boom could not go on like this. A month later, with the September data, I provided the answer: Signs that the Trucking Boom Has Peaked. And I added in the subtitle, “This is why the trucking business is so cyclical – and you can see it coming.”
So what does this mean?

We have already seen that freight shipment volume across all modes of transportation – truck, rail, air, and barge – in December had declined a tad from a year earlier, according to the Cass Freight Index. The index covers shipments of merchandise for the consumer and industrial economy but does not include bulk commodities, such as grains or chemicals. It was the first year-over-year decline since the transportation recession of 2015 and 2016 — and trucking companies have seen this coming for months:

(https://wolfstreet.com/wp-content/uploads/2019/01/US-Cass-freight-index-shipments-YOY-2018-12.png)

Over the past 12 months through January 2019, truckers ordered about 450,000 Class-8 trucks, while US truck makers have an annual capacity of about 320,000 trucks, which averages out to about 26,500 per month. So the phenomenal spike in orders in early and mid-2018 led to a historic backlog that truck makers are still working through. There have been some cancellations, and the backlog is shrinking, but it still extends well into this year.

The trucking business is a barometer of, and dependent on, the goods-based economy. In late 2017 through the summer of 2018, demand for transportation services, such as shipping by truck, surged under the simultaneous impact of a strong goods-based economy led by red-hot e-commerce; a buildup of inventories; pandemic front-running of potential tariffs, a resurgence of drilling activity in the oil patch that required equipment and supplies to be trucked in, etc. Freight rates spiked. Squeezed shippers wheezed in their earnings reports about these spiking transportation costs, while truckers were on Cloud-9 and ordered new trucks to meet the demand, and truck manufacturers were swamped with orders.

These shippers that had struggled with a “capacity crisis” in mid-2018 are now seeing signs of relief. This is reflected in the FTR Shippers Conditions Index, which combines four major conditions in the full-load market — freight demand, freight rates, fleet capacity, and fuel price — into an index. “A positive score represents good, optimistic conditions. A negative score represents bad, pessimistic conditions,” FTR explains. The most recent update, released January 24, is for shipments in November. The index was deeply negative as surging costs hit home. But in November, the index turned positive just a tad, the highest reading since August 2016:

(https://wolfstreet.com/wp-content/uploads/2019/02/US-FTR-shippers-condition-index-2019-01-for-Nov-.png)

“Conditions have improved noticeably for shippers in the last few months,” said Todd Tranausky, FTR VP of rail and intermodal. “The prospect of sustained lower fuel prices, increasing capacity in the truck and rail sectors, and the first signs of a turn in rail service raise the prospect of a much better 2019 than shippers expected during much of 2018.”

Because there are always two sides to everything: The historic boom for the trucking industry was a nightmare for shippers; and a transportation recession, dogged by excess capacity, always feels like Cloud-9 for shippers.

Shipment falls but freight rates remain red hot. Read... Boom Fizzles: Shipments Fall for 1st Time Since Transportation Recession 

 
Title: 🚛 What Trucking & Freight Just Said About the Goods-Based Economy in the US
Post by: RE on February 20, 2019, 02:31:10 AM
Another day I am glad my trucking days ae over.  Hope LD survives this one OK.

RE


What Trucking & Freight Just Said About the Goods-Based Economy in the US


What Trucking & Freight Just Said About the Goods-Based Economy in the US

Something has to give.

Starting to be a fascinating phenomenon: Rates charged by trucking companies and other transportation providers continue to surge on a year-over-year basis even as the volume of shipments has dropped below where it had been a year ago, while the “capacity squeeze” of 2018 has disappeared, and as the price of fuel is down year-over-year.

Freight shipment volume across all modes of transportation – truck, rail, air, and barge – in January ticked down (-0.3%) from January last year, according to the Cass Freight Index, the second year-over-year decline in a row. Those two declines are the first since the transportation recession of 2015 and 2016. The extraordinary plunge since the extraordinary peak in shipments last summer indicates that the transportation boom with its double-digit year-over-year increases has fizzled. This chart shows how freight volume changed from the same month a year earlier:

The Cass Freight Index covers shipments of merchandise for the consumer and industrial economy via all modes of transportation, but it does not include bulk commodities, such as grains or chemicals.

 

The year-over-year comparison in the chart above – for example, comparing January 2019 to January 2018 – eliminates the noise caused by the hefty seasonal fluctuations of the transportation business that occur every year.

But the chart also delineates the notorious cyclicality of the transportation business, where some big up-years are followed by down-years, such as the drop in shipments during the “transportation recession” of 2015 and 2016, when the goods-based sector of the economy itself went into a recession, and only the strength of the service economy kept GDP growth positive (at a miserably low 1.6% in 2016). The transportation recession was followed by a historic surge in shipments from late 2017 through the first half of 2018, causing a capacity squeeze that triggered a lot of hand-wringing among shippers, such as retailers and industrial companies. That boom and capacity squeeze have now been unwound.

This capacity squeeze in the trucking industry, and the subsequent resolution of it, shows up in the DAT Load-to-Truck ratio which tracks the demand-capacity balance. This ratio for “vans” – the trailers that Class-8 trucks haul across the US – surged twice in 2018: First, the spike in January 2018, when use of Electronic Logging Devices (ELDs) became the law, which caused a temporary squeeze as truckers had to rejigger their operations; and then, the flood of demand in the summer blew the ratio out again. But the demand-capacity balance is now reverting to the mean:

A good portion of the equipment and supplies for the industrial sector – manufacturing, oil & gas drilling, construction, mining, etc. – is transported by flatbed trailers. Demand for flatbed trailers skyrocketed in early 2018 as capacity suddenly tightened under the pressure that ELDs put on the industry, while demand was strong. DAT’s Load-to-Truck ratio experienced a historic spike from January through April 2018, then reverted to the mean and overshot the mean on the way down:

Rising capacity and declining shipments, no problem: Freight rates continue to surge. In January, the Cass Truckload Linehaul Index, which tracks per-mile full-truckload pricing and does not include fuel or fuel surcharges, rose 6.4% compared to January 2018. But that year-over-year increase in truckload pricing is backing off from the double-digit spikes last summer:

The average diesel price at the pump in January was slightly down from a year earlier, according to EIA data.

Yet the Cass Intermodal Price Index, which includes diesel prices and fuel surcharges, still rose 6.8% in January, compared to a year ago — but a far cry from the six double-digit year-over-year increases in a row last year.

Intermodal freight in the US is a combination of truck and rail, such as containers hauled by truck and then transferred to rail, or semi-truck trailers that piggyback on special rail cars. The chart below shows the blistering price increases in 2018 and continuing through January 2019, even as fuel prices are faltering:

In terms of overall expenditures for freight: For all modes of transportation combined – truck, rail, air, and barge – shippers spent 7.8% more in January to get their goods delivered than they’d spent a year ago, despite the decline in shipments, according to the Cass Freight Index for Expenditures. This increase in freight spending was caused by the continued though somewhat slower price inflation in transportation services.

In the stacked chart below, where each line represents one year, January 2019 is way above all prior Januaries. Note the seasonality: January usually marks the low point of the year! The year 2018 (black line, on top) was an outlier in the bunch. And January 2019 is an even further outlier:

The above chart shows what inflation in “transportation services” looks like: even as shipments decline, shippers such as retailers and industrial companies, are having to pay a lot more to get their goods to the destination. But this too has started to back off just a tad from the red-hot pricing environment last year.

Ultimately, something has to give: in an environment of weaker shipments and more capacity, freight rates cannot continue to surge.

And given the rising capacity, and the declining shipments, trucking companies have backed off their historic binge of ordering Class-8 trucks. In January, orders for these trucks plunged by 58% from a year ago, to the lowest level since October 2016, toward the end of the “transportation recession” when Class-8 truck orders had plunged to the lowest levels since 2009, and truck and engine manufacturers responded with layoffs. So that U-turn was fast, even for the legendarily cyclical trucking business. Read… Phenomenal Trucking Boom Ends, Trucking Bust Starts 

Title: 🚚 Inventory Pileup Sounds Alarm for Goods-Based Economy
Post by: RE on February 27, 2019, 12:33:15 AM
Where have all the Shoppers gone?

RE

https://wolfstreet.com/2019/02/25/inventory-pileup-sounds-alarm-for-goods-based-economy/ (https://wolfstreet.com/2019/02/25/inventory-pileup-sounds-alarm-for-goods-based-economy/)

Inventory Pileup Sounds Alarm for Goods-Based Economy

Inventory Pileup Sounds Alarm for Goods-Based Economy

“In 30 years, I’ve never seen anything like this”: CEO of warehouse operator Pacific Mountain Logistics.

Sales at merchant wholesalers (except manufacturers’ sales branches and offices) fell 1% in December 2018, compared to November, to $497.2 billion on a seasonally adjusted basis, and inched up only 1% compared to December 2017, according to the Census Bureau estimates this morning.

But inventories at these wholesalers rose 1.1% from November and jumped 7.3% from December 2017, to $661.8 billion. Over the two-year period through December, inventories have risen 11%. This includes inventories of durable and non-durable goods (we’ll look at them separately in a moment):

This surge of inventories on soft sales caused the inventory-to-sales ratio to spike to 1.33, up from 1.30 in November and up from 1.25 a year earlier.

This is a familiar pattern. As inventories are piling up, and as inventory carrying-costs rise, companies eventually react: They whittle down their inventories by cutting orders. As we have seen in 2015 and 2016, this hammers the goods-based sectors of the economy. In 2016, it dragged GDP growth down to just 1.6%, the worst growth rate since the Great Recession. The overall economy was barely kept out of a recession by the service sector.

The transportation sector tracked this perfectly as it fell into a steep recession in 2015 and 2016. Now a similar pattern is starting to form: A surging inventory-to-sales ratio as inventories are piling up, while shipment volume of goods, as tracked by the Cass Freight Index, have started to decline on a year-over-year basis.

The Cass Freight Index covers consumer and industrial goods shipped by all modes of transportation — truck, rail, barge, and air — but does not cover commodities such as grains.

I overlaid the two data sets: The Cass Freight Index for Shipments, expressed as percent change from the same month a year earlier (columns, left scale), and the inventory-to-sales ratio (green line, right scale):

Non-durable goods not helpful.

Sales of non-durable goods  — food, gasoline, apparel, agricultural products, etc. – at wholesalers fell 1.4% year-over-year in December, even as inventories ticked up 2.2% to $251.2 billion.

The standout here is the category of petroleum and petroleum-products inventories. Inventories and sales are valued in dollars, and the sharp drop in crude oil prices since August caused the dollar amount of petroleum and petroleum-products inventories to drop 12% year-over-year in December. Between September and December, inventories plunged 21% in dollar terms to $20.4 billion.

The problem is in Durable Goods Inventories

Sales of durable goods by wholesalers ticked up 3.5% year-over-year in December to $245.6 billion. But inventories of durable goods at wholesalers surged 10.6%, to $410 billion – the steepest increase since 2012, the period of inventory restocking coming out of the Great Recession:

Here are some standout categories, in terms of percent change in December 2018, compared to December 2017. Note the three categories with double-digit jumps, two of them relating to the construction sector:

The chart below compares the year-over-year percent change in durable goods inventories at wholesalers to the year-over-year percent change in the Cass Shipments Index. Note the turning point in shipments late last year. Inventories follow with a lag.

This situation of ballooning inventories on soft sales is showing up in the warehousing industry – and it’s getting blamed on companies trying to front-run trade tariffs. The surge of imports ahead of the potential tariffs – coming on top of the usual increase of inventories ahead of the Chinese Lunar New Year – has left warehouses and shipping terminals in Southern California “overstuffed and distribution networks jammed,” the Wall Street Journal reported.

“That stacked-up inventory is straining logistics capacity around the neighboring ports of Los Angeles and Long Beach, which together comprise the biggest U.S. trans-Pacific gateway,” the WSJ. It quoted BJ Patterson, CEO of warehouse operator Pacific Mountain Logistics in San Bernardino: “In 30 years, I’ve never seen anything like this,” he said.

Increasing inventories is counted as a business investment and is added to GDP growth; This is what has been happening much of last year. But conversely, the inevitable decline in inventories will be subtracted from GDP growth.

Apocalypse not now

The goods-based sectors comprise the smaller part of the economy. The services sectors dominate. The biggest of them are healthcare, finance, and housing (rents are services). In the US, you cannot get an overall recession with just the goods-based sector slowing down, as we have seen in 2016. It will pull down overall growth in the economy but won’t push the US into a recession. For a recession to happen in the US, the services sectors need to approach the zero-growth line, while the goods sectors are in decline – and that is not yet in sight.

Something has to give. Read…  What Trucking & Freight Just Said About the Goods-Based Economy in the US