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Another Day, Another Baltic Dry Decline: Longest Sequential Drop In 15 Years
After a 0.5% decline overnight, the BDIY is now at exactly 1,700, marking the longest sequential decline since the launch of Windows 95. Little to add here. We anticipate that Tim Geithner will soon suggest stress tests to be conducted on dry bulk shipping vessels to the 5 or so Greek CEOs running the industry, with bailouts to come for those leaked to be in need for financing.
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Head Shoulders Knees and Toes
LMAO, thankyou
Must read on this from the economist:
http://www.economist.com/blogs/newsbook/2010/07/shipping_rates_slump&fsr...
Thank you.
Gee, I wonder how Leo's self-built bulkshipping ETF is faring today?
DRYS 3.90 -0.15 oops
Oh dear. Leo will be right a lot of days, i think. Even over the next 6 months, which I expect to be brutal. But on the days when we go down...
Thinking ou loud here, is there any way to short shipbuilders? Too many ships seems to be the big problem.
Also, if there are still goods being shipped to the US but empty ships going back, shouldnt the BDIY roughly halve?
Bullish! It simply means that the worst is now behind us and the only way is up!
Contrarian view (not mine), the bigger the whole you dig the bigger the whole you or someone else will have to fill.
Yes, but will they have to refill the whole hole?
The freefall ends? What's up? The ships suddenly stopped getting older? :)
PPI and the Empire Index both were a massive fail. The only plus was the manipulated jobless claims. I wonder if those GM plants that were not shut down actually have any output or are they idle?
Barack O'Potus is going to need Roger Staubach or John Elway to pull at a 4th quarter victory. Last I checked, those 2 Republicans were busy, even with the depression....
I have to ask, perhaps largely out of curiosity, is this index simply tracking a statistic that is no longer a general barometer of global trade? We're talking about spot rates for capesize boats here... There have been excessive amounts of ship-supply in recent years, and further there are perhaps other methods of transportation (other classes of vessels) which may be used instead of the capesize, dragging this index downward but not necessarily meaning unhealthy global trade.
Look, I am bearish as anyone here and deflation/deleveraging is obviously what we're facing. Don't get me wrong. I am just curious to get some additional color here because nobody seems to pay a dime of attention to this index when it was previously on everyone's radar screen.
Also, note shipping volumes from the Port of Los Angeles hit all-time highs last month.
Curious to hear some thoughts on what's going on here... good information only, please =)
Any links to the Port of Los Angeles data detail?
I wonder, are they stock piling cars again?
Sure... I give credit to Mark Perry of UMich for the post on his blog... Below are the links to his site and the P. o. LA's site. It's the fifth or sixth post on his page from the top. Watch out, he's bullish!
Got to keep in mind what the Port of LA is "used" for -- shipments from Asia (e.g. tech goods and other manufactured mumbo jumbos) to the states and from Chile to the states (e.g. copper). The interesting note was the number of empty containers returning to Asia is at a huge level...
http://mjperry.blogspot.com/
http://www.portoflosangeles.org/maritime/stats.asp
Your comment "Watch out, he's bullish!" brought out a little chuckle. I don't care what you are as long as the data is pure and unbiased. This is very hard to find.
Everybody wants you to be just like them.
If find the state sales tax data is most informative. As well as the ICI mutual fund flow data.
"•Imports were up 32%, (WRONG) Exports were up 12%, empty containers were up 53%, overall up by 32% for month of June, YTD up 15%"
No, loaded inbound decreased from 381,175 to 371,888 y-0-y June - a Decline not an increase.... and frankly, a massive surge in empties is not indicative of a huge surge in global trade.
Being "bullish" does not give one liberty to change a "minus" to a "plus" sign
I think the point of noting the empties is that they were being sent back to Asia, from the States, for more Asian exports to be shipped-out from their ports (to whatever destination). The surge in empties is indicative of the expectation of a surge in Asian exports.
Statistics from the PoLA aside, nobody commenting on my original question about the usefulness (or potential lack thereof) of the BDIY.
Empty cans are always going back to China. It's too expensive to store them here if there the faintest chance they will be used in the future in China, not so much that a huge surge in imports is expected....esp w/ imports down y-o-y. The steamship lines would love to have back-load. The empty container yards in Yiwu & Shanghai are mind boggling.
BDIY is skewed by the number of capesize coming on line...but, so far I have not seen any stat that demonstrates the degree...and I look daily
There certainly is a lot of new capacity coming online. But neither has that happend in the last two weeks nor is that very recent news. Hence this should have been priced in all along or lead to a slow down trend. What we've seen over the last weeks cannot be explained away by increasing future capacity.
In any case, the BDI is a spot index. Ever tried to do a reverse repo on transport? It's like arguing in spring that electricity is cheap as we expect a hot summer. Can't store it...
"I think the point of noting the empties is that they were being sent back to Asia"
Could this be more of a function of lowering shipping rates than an actual need for empty containers? When fuel cost were up, and shipping rates reflected that, it was cheaper to leave those containers at their final destination and build new ones overseas.
The boats are going back regardless because freight schedules have been booked a year out. They can't just say; "not enough freight we are not sailing this week". They can tack on fule surcharges, but that's a different matter.
w/ LIB 2X that of LOB they might as well put empties on the boat.
Fair points by both of you guys here. I think we also agree that it's a supply-side issue skewing the index but that we're still talking about a reasonable collapse in actual trade of real goods. I like the point as well about storage for the empty containers being cheaper in the East. Maybe they can convert those empty bins into crude containers ;)
Worth a quick read
http://www.lloydslist.com/ll/sector/dry-cargo/article173510.ece
Just some thoughts:
1. Nobody seems to be paying attention because the MSM won't discuss bad news if they can avoid it. Indicators are discussed only if they are bullish. Has anyone on CNBC talked about the non-seasonal jobless claims today? When was the last time they even mentioned the BDI? When it was going up?
2. THE BDI is not subject to the manipulation of government forces, like most all government statistics (see shadowstats.com for an explanation). Therefore, it is a relatively reliable indicator of the DIRECTION of early production-cycle trade. So, once a fall becomes substantial and sustained, it would be hard to argue that this doesn't have some prediction on the idea that trade/early demand is declining.
3. There's no question that new ships are deflating the index. It would be hard to quantify by how much. But, that effect is going on throughout the economy - too much capacity for lowered demand. And likely most of the ships were bought on credit - with much higher rates in mind. Therefore, you are caught in a deflationary trap of too much capacity, too much debt, and not enough demand. Defaults bitchez!
Only a matter of time until the shipping cos end up issuing more equity (or simply defaulting on outstanding debt, to your point... hey, they are all Greek, after all...) to avoid covenant violations. I really loved buying shares last year right as DRYS issued equity. Twice. It was awesome.
Heck, I'm not even smart enough to know where to look for the facts to back up a theory that air freight is taking the place of some of the sea shipping.
Any truth to the possibility that air is eating some of the sea business?
Not a chance. Can you imagine shipping iron ore by plane? Or coal? Or even scrap copper? Rail might do, if the destination is on the same continent. Otherwise, not happening.
See? I told ya my ideas were flaky.
Maybe I should trade FOREX. I see the commercials on CNBC.
Did you mean Windows Vista, not Windows 95?
2010 - 15 yrs = 1995 =~ launch date of windows 95
Sometime in the recent past there were stories about all the idled ships sitting around collecting rust and barnacles. Have those ships been put back into use or are they still sitting idle?
I guess if there are a lot of ships sitting idle and the economy is improving, the price would remain flat. It did go up after 2008, but that was a bounce after companies panicking and going bust.
Classic example of malinvestment during a boom... Thanks for that Central Banks
If the decline beats what happened in mid-2008 (even in percentage terms), it seems we are in for a bit of a skinning (financially speaking).
Given that the world economic picture is a few shades worse than 2 years ago, I'd say this is a big sign that "real" trade is collapsing again.
Stimulus driven fakery maybe but any pick-up in the BDI (and by inference the overall economy)has been a complete sham.
In any case, looks like most of the push is internal demand creation in most large economies.
I say we are in for a rhyme of history (recent), but a resonantly destructive one.
Batten the hatches on them capesizes.
Capesize capsize!
ORI
http://aadivaahan.wordpress.com
I'm tellin' ya, you need to watch Mad Money. See, Jim Cramer explained that the plunging BDI isn't being caused by a lack of shipping, it's being caused by a glut of ships.
that is what seems to me is going on as well....although please never quote that source ever again. (-69, +1)
follow DSX and DRYS for in-tune info on dry bulk shipping mkts...
For the record, anytime I mention JC it's for the amusement value. I still contend, though, that he's the funniest person on all of t.v. right now, half in the way he intends, half in a way he doesn't.
"it's being caused by a glut of ships."
If Crammer (intended misspelling) says it, it must be true! I can easily see how a 23% increase in new ship deliveries could plunge the rates by 60%. Of course that would assume that none of the current ships in service were retired.
Yeah, and unemployment is actually just a glut of spare time.
"Chinese iron ore purchases dropped for a third straight month in June as steel demand weakened from automakers and builders. Vale SA, BHP Billiton Ltd. and Rio Tinto Group, the biggest exporters of the commodity, this year abandoned a 40- year custom of annual contracts in favor of quarterly agreements as they bet on rising prices. "
"Crude steel production in China fell to a four-month low in June, according to data from the National Bureau of Statistics today. Prices are likely to drop 10 percent for the rest of the year because of high inventory and poor demand, JPMorgan Chase & Co. said in a July 12 note. "
http://www.washingtonpost.com/wp-dyn/content/article/2010/07/15/AR201007...
This is pretty amazing, actually, that the triumvirate cartel of Vale, BHP and RTP abandoned the annual contracting practice. Be sure to watch this in the medium-term future. Thanks for the post.
This has probably been one of the better comment-threads on a ZH post, I think... now we're talking about actual demand for goods here! (or at least trying to)
But still a thousand points above the 2008 lows, BOO-YAH!!
As warned about for some time... EURUSD daily chart is bullish.
http://stockmarket618.wordpress.com/about
Flat is the new up.
LOL Love these comments, keep them coming!!!
In Vancouver harbour this morning there were 14 empty freighters sitting there. Same as on Tuesday. On the weekend there were 12, which I thought was a lot. A couple of weeks ago there were maybe 8-10.
Maybe they just like hanging out in Vancouver's harbour in July.
BDY is down due to The biggest storage vesell of them all is sitting idle..& empty, Housing. 3000 sf of empty space and more each day,
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