Baltic Dry Index & Shanghai Containerized Freight Index

[TonyGosling]

Both these rates give you a good idea whether real trade is going up or down

Shanghai Containerized Freight Index Totally Collapses, Top Carriers Wage Price War to Form Global Shipping Oligopoly
by Wolf Richter • June 17, 2015
http://wolfstreet.com/2015/06/17/shanghai-china-containerized-freight- index-collapses-top-carriers-maersk-price-war-to-form-global-shipping- oligopoly/

This is what two unnamed container shipping executives, one from an Asian carrier, the other from a European carrier, told the Wall Street Journal about the containerized-freight fiasco on the China-Europe route:

“We are now shipping at an absolute loss. With the bunker-adjustment-factor surcharge at $300 for Asia-Europe, we are losing more than $50 per box.”

“Unless by a miracle demand grows, we are up for heavy losses in the next quarter and maybe the rest of 2015.”

The rate for shipping a container on that route, after plunging for months, is now below even the cost of fuel.

The China Containerized Freight Index (CCFI), which covers spot market rates and contractual rates from Chinese ports to major destinations around the world, dropped another 1.2% last week, to a multi-year low of 851.4. The China-Europe component dropped 2.5%. The CCFI is now 21% below where it was in February, and 15% below where it was in 1998, when it was set at 1,000!

The Shanghai Containerized Freight Index (SCFI) paints an even drearier scenario. Unlike the CCFI, it is composed only of spot rates, not contractual rates, from Shanghai to the rest of the world. And this babe plunged 6.8% last week to 581.25, an all-time low, 42% below where it was during the Financial Crisis, on October 16, 2009, when it was set at 1,000, and down 47% from February.

This is what the four-month plunge looks like:

China-Shanghai-Containerized-Freight-index-2015-06-12

The Shanghai-Rotterdam sub-index plunged 14.4% last week to an all-time low of $243 per twenty-foot equivalent unit (TEU). Rates began to collapse in February. By April, when they’d crashed to around $400 per TEU, Drewry Maritime Research estimated that the break-even rate for most carriers was $800 per TEU on that route. But now, the rates, at $243 per TEU, don’t even cover the cost of fuel of about $300 per TEU. Hence the screaming by the shipping execs!

But not everyone is screaming.

“I can’t speak for other companies, but small and mid-size carriers controlling a 3% to 5% market share – with very few exceptions – have been unprofitable for the last seven years,” explained Nils Andersen, CEO of the Danish giant A.P. Møller-Mærsk, whose Maersk Line is the largest container carrier in the world.

“After such a long period of not being profitable, it defies logic to continue to invest in the business,” he told the Wall Street Journal, thus proffering his agenda: pushing all but the largest carriers out of the business to build a global shipping oligopoly, with him at the top.

“Some of those companies have not been able to identify an acceptable way to exit the business, so they continue to throw good money after bad money by investing in more vessels,” he said. “It’s highly unlikely that there will be an easy way to make a profit going forward for a small or midsize carrier.”

So they better get out now. That’s the message.

Maersk is deploying its big guns: lots of money and Ultra Large Container Vessels (ULCVs). It just ordered another 11 second-generation “Triple-E” vessels of 19,630 TEU capacity for $1.8 billion, with an option for six more, to be delivered between April 2017 and May 2018, for its Asia-Europe route, Drewry reported. Maersk now has a capacity of about 400,000 TEU on order, or 13% of its fleet. And it will order even more ships, as part of its $15-billion investment program, which central-bank easy-money policies have encouraged it to do.

With shipping rates at “historical lows,” according to Drewry, even a giant like Maersk would “feel the pinch”:

The comments from Andersen perhaps betray a company that knows it is in for a bumpy ride in the short-term at least. The removal of a few pesky competitors would certainly help to lift freight rates off the floor.

Maersk currently controls 15.3% of the global container capacity. The big three carriers together – Maersk, MSC, CMA CGM – control 38%, up from 26% in 2005. Including Hapag-Lloyd and Evergreen, the top five control 48%, up from 37% in 2005. These share gains at the top are “seemingly unstoppable” in a race to add capacity.

So when Andersen exhorted midsized carriers with a share of 3% to 5% to exit the business, he covered just about all carriers other than the top three. If he gets his wish, it will be one heck of a global oligopoly.

The top three, particularly Maersk, are relentlessly adding capacity, and thus global overcapacity, hoping that they’ll have the resources to survive the price war, that easy-money policies that have made all this possible will continue, and that smaller players won’t survive – particularly in an environment of sluggish demand.

But maybe Andersen miscalculated?

Turns out, medium carriers are “displaying their survival instincts” by ordering their own ULCVs, Drewry explained. It’s “a defensive move to fight off attack,” but “it guarantees years of overcapacity that will depress freight rates and profitability for all. No wonder Maersk is annoyed.”

Overcapacity and “sluggish westbound volumes have brought about the worst spot-market rate collapse that this trade has experienced,” Drewry found in a separate report, as shipping volumes in the first quarter had fallen 1% year over year.

With demand expected to grow only marginally, and with these new giant ships adding to overcapacity, things will get tough over the next five years, Andersen said. But being the largest carrier in the world, Maersk could afford the price war to achieve his lofty goal of a global shipping oligopoly. “I don’t think it will backfire,” he said, perhaps not totally certain about the outcome, in light of the rate fiasco and glut in ships that he himself, drunk with cheap money, has helped create.

Other gluts have developed, and this one, only a miracle could stop, but miracles have become rare. Read… Biggest Glut in Recorded Crude-Oil History Taking Shape

[TonyGosling]

"Nothing Is Moving," Baltic Dry Crashes As Insiders Warn "Commerce Has Come To A Halt"
Two brilliant tools to keep an 'independent' eye on whether the REAL, QE Free, global economy is grinding to a halt.
http://www.marinetraffic.com/
https://www.vesselfinder.com/
Submitted by Tyler Durden on 01/11/2016 13:05 -0500
http://www.zerohedge.com/news/2016-01-11/nothing-moving-baltic-dry-cra shes-insiders-warn-commerce-has-come-halt

Baltic Dry China General Motors Reality recovery United Kingdom World Trade
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.