Baltic Dry Plunges By Over 8% Overnight, Most Since 2008

Tyler Durden's picture




 

It has been a while since we looked at the Baltic Dry Index, which when normalizing for the excess glut in dry container ship supply (such as right now - 5 years after all the excess supply in the industry - has long been normalized), continues to be one of the best concurrent indicators of global shipping and trade. We look at it today, moments ago it just posted an epic 8.2% plunge, crashing from 900 to 826, or the biggest drop since 2008! Of course, conisdering the collapse in global trade confirmed in past days by both Chinese and US data, this should not come as a surprise, although we are certain it will merely bring out the BDIY apologists who tell us that supply and demand here (like in every other Fed-supported market) are completely uncorrelated.

 

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Wed, 12/12/2012 - 11:36 | 3055863 moonstears
moonstears's picture

"welcome to the new order of the world" or the "New World Order"...see...

http://www.youtube.com/watch?v=CMaCg4fpJKg

Wed, 12/12/2012 - 10:14 | 3055473 MFLTucson
MFLTucson's picture

Forward to the cliff

Wed, 12/12/2012 - 10:17 | 3055483 drivenZ
drivenZ's picture

I wouldn't read too much into this, (of course people here will since they believe everything written by Tyler)

 

Ive followed the BDI for years and still don't put much reliance on it. There are seasonal issues, there are HUGE overcapacity issues, there are companies like Vale taking their shipping in house http://www.reuters.com/article/2012/01/03/us-vale-china-idUSTRE80201I20120103, there are port expansions going on cutting down port congestion, there are desperate shippers, there are stockpile issues....etc, etc. There's just a whole slew of ills and nuances in the industry. And despite the fact that this is a large drop, the BDI is historically extremely volatile.

For the reason that if you have 100 ships that NEED to move 101 loads of cargo right NOW, the BDI gets bid up quickly because no one wants to be the guy that waits. BUT if you have 100 ships and only 99 loads, none of the shippers want to be the guy missing out on a charter so they accept lower and lower rates, leading to a feedback loop of sorts.   

And no, the excess supply has NOT been normalized. That is completely wrong. In the last 2 years newbuild orders were still strong. Newbuild prices came way down and anyone with cash was doing their damndest to keep ordering ships. And scrapping, while up, hasn't been as robust as people hoped. 

 

 

Wed, 12/12/2012 - 10:42 | 3055614 drivenZ
drivenZ's picture

FYI...YTD fleet growth? 10%. 

 

New tonnage the last 4 years? yea, not normal. Atleast not in this environment.

2009- 40M DWT

2010- 80M DWT

2011- 100M DWT

2012- 110M DWT

Wed, 12/12/2012 - 10:21 | 3055503 HD
HD's picture

CNBC is very concerned about this massive drop in the Baltic Dry...you can tell, because the news is no where on their website.

...but Jamie Dimon said some shit about something - so it's the top story.

Wed, 12/12/2012 - 11:10 | 3055747 caimen garou
caimen garou's picture

BDI will be revised next month to it does'nt matter and the fed will introduce cash for clunker ships!

Wed, 12/12/2012 - 11:34 | 3055854 moonstears
moonstears's picture

To loosely quote a ZHer, from the other day who made me laugh(sorry, forgot which)...

"YOU NO GET FRIPP FROPS"

Wed, 12/12/2012 - 11:40 | 3055888 HD
HD's picture

That is racist...and hilarious.

Wed, 12/12/2012 - 11:40 | 3055883 Rip van Wrinkle
Rip van Wrinkle's picture

The chart up until arouind mid-2008 looks remarkably like the London property market.

Wed, 12/12/2012 - 12:44 | 3056148 falak pema
falak pema's picture

the London market is Baltic wet! 

Wed, 12/12/2012 - 12:56 | 3056195 omi
omi's picture

This is evidence of manufacturing come back onshore. Invest in Detroit and other cheap-o areas.

Wed, 12/12/2012 - 13:48 | 3056430 TheLastMan
TheLastMan's picture

USA fracking is fracking up the index?

Wed, 12/12/2012 - 13:58 | 3056473 Fix It Again Timmy
Fix It Again Timmy's picture

Looks like the US market for Chinese-made rubber dog shit has tanked....

Wed, 12/12/2012 - 13:58 | 3056478 Zola
Zola's picture

Bernanke may be destroying people's dreams, but he is also giving them a sense of purpose.

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