Shipping down 93%

[Sassy]

Just came across the Baltic Exchange Dry Index  http://www.investmenttools.com/futures/bdi_baltic_dry_index.htm
& this YouTube video
http://www.youtube.com/watch?v=SXATSV8S3-M&eurl=http://www.noconfidence.co

Had never heard of this before - some dire warnings to get your house in order while you still can...

[Bishopknight]

Sassy,

This means 93% less goods/food are being shipped to America, right?  Mainly because of inventory backlogs here I assume.

[peternap]

That chart looks like a ski jump Sassy!
I'm still pushing local suppliers and even if we muddle through this, keeping locals will only help.

[muldoon]

I have been watching this as well lately.  The BDI is for dry shipping, coal, grains, iron ore.  Primarily this shows the economy of China and Korea falling apart.  Others as well for sure.  Several factors in play, consumer demand dropping everywhere.  Letters of credit rescinded to manufactures and shipping lines.  Storage facilities stacked high and overflowing at the docks with no one to buy them here.  The net affect is that new shipments are not wanted right now because there is overcapacity in nearly every sector.  (Think about how many home depots and starbucks do we really need right now?)

Concerning for sure, but a few things also to consider.  As things were slowing down - they accelerated production.  This is a common event, as times get tight producers try to ramp up production in hopes that if they can sell more than it can be ok.  They did this going into a slowdown and pretty much got fisted for their efforts.  That chart went parabolic - it's easy to recognise, they never last.  I have said before that when you have a bubble being represented in a chart it looks like that - and they nearly always reverse violently at some point.  Another thing is that even tho the numbers are down huge year over year, or especially from the peak - historically they are at 200-2001 levels. 

I wouldn't panic from this data unless I lived in China.

[muldoon]

doh - the other thing that I wanted to say was that this refers to average price of shipping.  a good chunk of that runup was directly related to the cost of oil when it ran up. 

[Sassy]

Muldoon, thanks for clarifying that some - I'd never heard of the BDI - I saw that even though it had dropped way down, it dropped to the previous levels in the early 2000's but it was so extreme. 

Well, if China goes, what happens to us?  Or will that just expedite the NWO?   

[glenn kangiser]

I have dropped my BVDs.

[muldoon]

I said above that the BDI news had been out for a while now and didn't really panic me, this news out this evening however is certainly taking it up a notch.

What does this mean for you?  If there's something you want that's made in china - you better get it now because once its off the shelf I wouldn't expect it back anytime soon. 



http://www.telegraph.co.uk/finance/4229198/Shipping-rates-hit-zero-as-trade-sinks.html

Shipping rates hit zero as trade sinks

Freight rates for containers shipped from Asia to Europe have fallen to zero for the first time since records began, underscoring the dramatic collapse in trade since the world economy buckled in October.

By Ambrose Evans-Pritchard, International Business Editor
Last Updated: 5:42PM GMT 13 Jan 2009

"They have already hit zero," said Charles de Trenck, a broker at Transport Trackers in Hong Kong. "We have seen trade activity fall off a cliff. Asia-Europe is an unmitigated disaster."

Shipping journal Lloyd's List said brokers in Singapore are now waiving fees for containers travelling from South China, charging only for the minimal "bunker" costs. Container fees from North Asia have dropped $200, taking them below operating cost.

Industry sources said they have never seen rates fall so low. "This is a whole new ball game," said one trader.

The Baltic Dry Index (BDI) which measures freight rates for bulk commodities such as iron ore and grains crashed several months ago, falling 96pc. The BDI – though a useful early-warning index – is highly volatile and exaggerates apparent ups and downs in trade. However, the latest phase of the shipping crisis is different. It has spread to core trade of finished industrial goods, the lifeblood of the world economy.

Trade data from Asia's export tigers has been disastrous over recent weeks, reflecting the collapse in US, UK and European markets.

Korea's exports fell 30pc in January compared to a year earlier. Exports have slumped 42pc in Taiwan and 27pc in Japan, according to the most recent monthly data. Even China has now started to see an outright contraction in shipments, led by steel, electronics and textiles.

A report by ING yesterday said shipping activity at US ports has suddenly dived. Outbound traffic from Long Beach and Los Angeles, America's two top ports, has fallen by 18pc year-on-year, a far more serious decline than anything seen in recent recessions.

"This is no regular cycle slowdown, but a complete collapse in foreign demand," said Lindsay Coburn, ING's trade consultant.

Idle ships are now stretched in rows outside Singapore's harbour, creating an eerie silhouette like a vast naval fleet at anchor. Shipping experts note the number of vessels moving around seem unusually high in the water, indicating low cargoes.

It became difficult for the shippers to obtain routine letters of credit at the height of financial crisis over the autumn, causing goods to pile up at ports even though there was a willing buyer at the other end. Analysts say this problem has been resolved, but the shipping industry has since been swamped by the global trade contraction.

The World Bank caused shockwaves with a warning last month that global trade may decline this year for the first time since the Second World War. This appears increasingly certain with each new batch of data.

Mr de Trenck predicts Asian trade to the US will fall 7pc this year. To Europe he estimates a drop of 9pc – possibly 12pc. Trade flows grow 8pc in an average year.

He said it was "illogical" for shippers to offer zero rates, but they do whatever they can to survive in a highly cyclical market.

Offering slots for free is akin to an airline giving away spare seats for nothing in the hope of making something from meals and fees.

[ScottA]

So what you are saying there soon will be nothing to buy? This could cause prices to rise? Which could lead to more products to buy? 

[muldoon]

Scott,

As hinted in the mother of all food shortages thread, I think the setup is basically the same.  A surplus of inventories across the board coupled with decreasing demand will put many companies out of business.  As it applies to food, it's the northern states that cannot get propane, or the farmers who can not get fertilizer, just like last year it was diesel prices that stopped them.  Once those inventories are depleted, demand will still be there but the active "pipeline" of just in time inventory will be disrupted.   

The same situation applies to oil as well, a low crude price effectively shut down rigs and refineries the last few weeks - this lurch will hit the consumer at the same time as a shortage until demand drives production back up.   Not that there will be noting to buy, but that a supply chain shortage is in the works across all industries.  When people panic over that and the shortages it brings - prices of some things like food and fuel will rise (perhaps dramatically?) until the market can re-balance itself. 

I cannot see any circumstances where flat screen TVs will be rising in price. 

[harry51]

The first thing that comes to mind is the old adage that "where goods cross borders, armies don't." If goods stop crossing borders, what's next???