Ocean Shipping Rates Plunge: Just A Blip Or The End Of Globalization?

Saturday, February 9, 2019
By Paul Martin

by John Rubino via DollarCollapse.com,
ZeroHedge.com
Sat, 02/09/2019

The Baltic Dry Index represents the cost of renting an ocean-going container ship to move goods from, say, Chinese factories to the Port of Los Angeles. The more stuff being made and sold, the higher the demand for such ships, and thus the higher the price to rent one. And vice versa.

This is definitely one of the vice versa times. After rising to robust levels in mid-2018 the Baltic Dry Index has since plunged by about two-thirds.

[ZH: we are well aware of the seasonality within the global shipping markets but even adjusted for that, this is the worst collapse in shipping rates since 2012 (which prompted Bernanke to unleash Operation Twist and QE3)…]

Here’s a brief article on the subject from today’s Wall Street Journal:

Free-Falling Freight Rates Spell Trouble For Shipping

Dry bulk shipowners face a long period of uncertainty as spot prices collapse and China shipments shrink.

A slowing global economy, coupled with weak demand from China over the Lunar New Year and from Brazil after Vale SA’s iron ore disaster, is dragging shipping rates to near record lows, and few in the industry expect things to improve any time soon.

Brokers in Singapore and London said capesize vessels, the largest ships that move bulk commodities like iron ore, coal and aluminum, were chartered in the spot market for as low as $8,200 a day on Thursday, a $500 decline from Wednesday. Break-even costs for carriers can be as high as $15,000 a day, and daily rates in the capesize market hovered above $20,000 last year.

“Everyone is looking for a catalyst to push the market up, but it’s not there,” said a Singapore broker.

The Baltic Dry Index, which tracks the cost of moving bulk commodities and is considered a leading indicator of global trade, is down more than 50% since the start of the year.

The long Lunar New Year holiday in early February is one of the slowest periods in commodities trading as factories in China, the world’s biggest importer of raw materials, shut down. But ship executives say the bulk seaborne freight business is more broadly suffering from the lowest demand in two years, while China’s trade tussle with the U.S. is making the market more volatile.

“A long slowdown in the Chinese economy will hurt commodity demand and send shipping rates sharply lower,” Bloomberg Intelligence industry analyst Rahul Kapoor said.

The Vale iron ore disaster in Brazil in January, in which a mining dam burst, triggering a flood that killed at least 150 people and left close to 200 more missing and feared dead, created a new source of uncertainty.

The Rest…HERE

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