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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moonstears's picture

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

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

MFLTucson's picture

Forward to the cliff

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. 

 

 

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

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.

caimen garou's picture

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

moonstears's picture

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

"YOU NO GET FRIPP FROPS"

HD's picture

That is racist...and hilarious.

Rip van Wrinkle's picture

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

falak pema's picture

the London market is Baltic wet! 

omi's picture

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

TheLastMan's picture

USA fracking is fracking up the index?

Fix It Again Timmy's picture

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

Zola's picture

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