Total Global Collapse. Shipping is dying

[Neubarth]

I hate to disillusion those of you who have bought back into the stock market.

We are headed into the greatest Depression the World has ever seen in modern times. The 1930's ere nothing compared to what is evolving.

Read this:

Shipping rates hit zero as trade sinks

Shipping rates hit zero as trade sinks - Telegraph

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

The cost of shipping goods from Asia to Europe has tumbled

"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 unmit*igated 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.

 

[Neubarth]

Im a former Naval Officer. You can judge the health of the world's economy by looking at the Cargo Shipping. Right now, there "Ain't NONE!"

Obama's stimulous package will just forstall our total collapse, but it will not prevent it. We depend upon the World economy and they depend upon us, but we can not do it alone

The last sentiment in the above article is a tremendous understatement as only the English can do. I laugh with tears in my eyes as I read it. "Global Trade Might Decline.

Hell, it is collapsing.

 

[Toro]

You might be right. However ...

The reason why global trade collapsed in the fourth quarter was because trade financing dried up. Trade financing is dependent on short-term financing since financing cargo is similar to financing working capital. In the fourth quarter, a lot of that just stopped as credit markets froze. When you cannot finance your trade bills, you cannot send goods across the ocean.

Those credit markets are now unfreezing and capital is being offered again at, albeit high rates, rates less than they were 2 months ago. I have not spoken to the guy in the know who informed me of what was occurring in trade financing in over a month, so perhaps it has not changed. However, I imagine it has become unjammed as other areas of the credit market have.

They were talking about this on CNBC this morning and someone mentioned that day rates had risen to $12,000 from $0 recently. That's down from $125,000 a year ago, however.

Here is the Baltic Dry Index, which is an index of shipping costs for dry bulk goods.

Baltic Exchange Dry Index (BDI) & Freight Rates

Interesting article nonetheless.

 

[Toro]

BTW, German exports fell 27% and Taiwan exports fell 42% in November.

 

[I7coder]

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[CrusaderFrank]

I posted something similar on that other website.

My brother in law is a real commodities trader, he deal in products not contracts, and he was telling me how bad shipping was a year ago. He lost a line, I think Philly to Shanghai, due to lack of business.

 

[Mr. H.]

Ominously forboding indeed.

 

[Toro]

The Baltic Dry Index is currently rising.

 

[Neubarth]

Minor fluctuations on the bottom, just like a fish out of water flopping all around mean nothing. Occasionally that fish can flop pretty high, but that means nothing as it is still dying.

 

[Toro]

Minor fluctuations on the bottom, just like a fish out of water flopping all around mean nothing. Occasionally that fish can flop pretty high, but that means nothing as it is still dying.

It has more than quadrupled off the bottom. That is not a minor fluctuation. It is also higher than it was for much of the 1990s.

Here is a logarithmic graph, which is a better way of looking at it.