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World's Largest Container-Shipper Warns Global Trade Is Slowing Down
While it will hardly come as a surprise to many, especially those who have followed the historic collapse of the Baltic Dry index to levels which, all else equal, signify a global depression of epic proportions...
... and which led South Korea’s Hyundai Heavy Industries, the world’s largest shipbuilder, to report a $3 billion loss in 2014, the recent comments of the CEO of the world's largest container-shipping group, Maersk Line, should put things into perspective, especially for those who say that the Baltic Dry is no longer indicative of anything but massively dry-bulk ship overbuilding and excess supply (some 8 years after the past cyclical peak).
Unfortunately, as Søren Skou, Maerk's CEO, admitted when he warned that global trade growth could slow this year from recent 4% growth ratnes, as Chinese, Brazilian and Russian economies disappoint, the Baltic Dry is still not only relevant and accurate but telling the real story of global growth, or lack thereof.
As the FT reports, container demand rose by about 4% in both 2013 and 2014 and Maersk Line, the Danish group that ships about 15% of the world’s seaborne freight, expects it to increase 3 to 5% this year. Actually make it 3%. Or lower.
“I’m personally more towards the low end of that,” Søren Skou, Maersk Line’s chief executive, told the Financial Times. “Growth from a historical perspective is quite sluggish. It has a huge impact for us as an industry.”
Furthermore, in the ongoing debate whether the collapse in crude prices is due to excess supply or a global contraction, this is what the world's biggest shipper thinks: Mr Skou called the halving of oil prices in the past year “a net positive for container growth” but nonetheless said the opposing forces were potentially greater.
In other words, yes supply isn't helping, but it is the lack of global demand that is pushing equilibrium levels lower, aka global deflation.
“The economies in Europe are still very sluggish. Brazil, Russia and China: those three economies used to drive a lot of growth, and right now we are not really seeing that to the same extent. The only real bright spot is the US, and even the US is good but not great,” he added.
Well, yes, because as even economists finally figured out, it is once again snowing in the winter.
February Chicago PMI plunges to 45.8, its lowest reading since July 2009. Bad weather and West Coast labor strife are cited.
— Joseph A. LaVorgna (@Lavorgnanomics) February 27, 2015
Back to the Maersk CEO whose comments are seen as a good indicator of global trade as it carries goods and products between Asia, Europe, the US, Africa and Latin America: we learn that following what was supposedly the "hottest year on record" it snowed pretty much everywhere too, and what we, and Goldman, both said about the world being in contraction now is validated when looking at trade volumes:
He said that it was always hard to interpret the first quarter because of the Chinese new year but added: “To my mind volumes were sluggish. There is nothing in container volume numbers that suggest that the global economy is just on the verge of starting a new growth trend.”
Why is 4% growth (and certainly lower) important? Because just like 7% is roughly the growth number that China needs to hit every year to avoid social "disturbance", anything below this and suddenly you are talking mass corporate bankrutpcies due to oversupply, and a race to the pricing bottom by companies all of which are massively levered (in fact, as we have shown on numerous occasions, corporate leverage is the highest in history once more):
"Before if you acquired too much capacity you could kind of work your way out of it. In a 4 per cent environment capacity decisions take on a different perspective if you get it wrong. The good old days aren’t coming back,” he added.
And yet the biggest paradox, or perhaps most logical outcome, of all this is that just as margins are about to be squeezed across the entire global supply chain, the healthier companies are now rushing to do what the oil driller are doing, and overproduce, in the process pushing prices even lower in hopes of putting marginal companies, and those which don't have access to cheap and easy funds, out of business. Call it the Amazon effect, only here one is dealing with net debt leverage of 3x, 4x or higher. To wit:
Despite the warning, Maersk is about to order new ships for the first time since 2011 when it bought 20 Triple Es, then the world’s largest vessels capable of transporting the equivalent of 18,000 20-foot containers.
Mr Skou said a decision would be made between April and June with the likelihood that more Triple Es would be ordered, possibly slightly modified to take up to 20,000 containers. Maersk has said it needs the new ships to help it maintain its market leadership up until the end of the decade.
So with global demand lower as a result of slowing trade, and with Maersk about to boost ship supply even more, the result will be an even more aggressive drop in cargo and haulage prices as the deflationary wave hits yet another industry, in the process forcing seaborne transportation to be the latest to succumb to deflation, which for the highly levered sector means even more defaults are imminent now that China no longer is pumping nearly $4 trilion in total new credit every year.
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No fucking shit? I thought things were great? Obama said good times were here to stay.
The Chinese Russian railway is destroying the need for shipping.
My favorite part of this article:
Joseph A. LaVorgna
Man, his continuing part of the July 2008 statements on CNBS that "we are not in a recession" are still classic, IMHO.
Lots of trends throughout history where commerce has shifted from land based routes to sea based ones and vice versa.
That commerce is shifting to land based routes is indicative of how secure Central Asia has become.
The Chinese-Russian railway has been there since about 1903. Won't make any difference in world trade routes unless a war severs marine transport options. In which case, the only people that can use the railway are the Chinese and the Russians since a war that severs Chinese maritime trade routes means war with the USN, which also means war with the EU. Poof go all the Chinese markets that can be reached by land and poof go all the markets that can only be reached by sea. And poof goes China's mercantile empire. Which makes Chinese warlords a bunch of pooftas.
Poof go US and EU electronics for several years. No more cars, planes, internet etc.
And poof USA because China will crash USD well before a war in Chinese waters.
Poof a Golden Yuan and Ruble.
Bring it on !
To some extent. Only btwn RUS/CHN to DEU for the most part.
The Rail Traffic will keep picking up. There are plenty of places where Ships are needed. Dockworkers'Strike isn't helping, though.
We don't need no stinking container ships to send Facebook posts and Tweets. It's the new economy.
This *must* be good for American Stocks. BULLISH! BUY AAPL!
One shipping container can hold like what, $3 Billion of iPhone 6's.
iHeard they're coming out with iPhone 7 next year. I wonder how many generations of iPhones there will be before it all breaks down.
edit: Looked it up: it's this year.
I make it closer to $120 million worth.
Wait until they start building TEU prefab house modules in China, and start shipping them here.
Then we just need a good supply of Mexican truck drivers and ElSalvadoran crane operators. You know, to do jobs lazy,useless Mericans won't do.
And as a bonus, China can pony up the cash to build ports in Mexico, so we don't have to deal with the pesky unions.
USA, USA!
http://www.wired.com/2014/02/nicaragua-canal/
Maybe they need to revisit 'SLAVE TRADING'... Perhaps the Goldman boys could help them with that...
Goldman bankster here, we've got some great slaving structured products; (1) mortgages; (2) student loans; (3) payday loans; (4) bail bonds; and (5) slave swaptions. As the only licensed slave trader in North America, we make markets in every race, and we're running a 2:1 special on Central Americans.
If I can use fractional reserve to lever up the paper value on that 100x... Then, package that instrument to sell to my other buddy here, who can thusly leverage it up 100x and sell it to someone's grandma MOMO...\
Hans... BUBBY!!!... I'M IN goddammit!!! I'm ya White Knight!
What's next? Slave Backed Securities? Slave Debt Obligations?
They already exist, it's called a student loan.
Oh SNAP! [& I mean that 'literally', not 'figuratively']... lol
Federal Reserve Notes.
This bodes well for moving your stuff to Hawaii and other overseas destinations - no?
Lower costs due to greater competition and recent lower oil prices...
Only if you're looking to purchase a recently bankrupt dry shipper and do a naval U-Haul. ;)
How long will the hull of one of those shippers last?
How about turing one into your own private island?
You are not very innovative for a scientist.
Too L. Ron Hubbard. And that's scientology.
Kind of depends on your personal veiw of asthetics. For instance, google prefers barges:
http://en.wikipedia.org/wiki/Google_barges
but other companies have gone with cruise ships (likely gutted of everything fun):
http://developers.slashdot.org/story/05/04/20/2251203/offshoring-to-a-sh...
Of course, like all good ideas, someone else already came up with it:
http://www.worldislandinfo.com/Starting%20island%20country.html
"More power Scotty. I need moar power."
"I'm giving you all she's got Captain. She's breaking up, she's breaki........."
"It's during times like this when I wish the fiat volume scale of 1-10 goes up to 999,999,999,999,999" - Yellen, brain storming during a pot smoking session at the Fed.
"Oh..wait...it does."
Not to worry, we'll be at war again soon and these ships can get busy sending thousands of pallets of Fed Reserve Notes over to whatever country we bomb the shit out of. Bankster logic: If one broken window is good, a whole country full of bombed houses is Teh Awesome
Haven't seen it yet at Walmart?
All shelves are stocked with all sorts of crap.
So, where is all the crap coming from?
Or, maybe no one is buying the crap already in the store?
Ships full of crap no one needs.
But wait wait - China hasn't yet devalued the Yuan - to do their part in the great Currency War!!
All that crap will be 50% off next year. Better wait to buy when all is on sale and join the Club of the Disinflationaries...
Any thoughts on how long the deflation stage will go on? What events would signal the rock bottom?
Cash, gold and silver, that is all I can think to do (besides being out of debt and having some preps in place, some home repairs done).
It goes on until either the Fed fires up the nuclear powered presses or until low prices lead to physical supply shortages. The former would be in response to some financial crisis that hits and the latter, well, when you see companies start dropping like flies, you'll know we're somewhere near the bottom. How much is that <insert store bought good here> worth to you if it is unavaliable?
Long NASA.
"Six hours in a space suit." Start doing the math.
At 50,000 miles per hour that would be...
It goes on until essential supplies can no longer be delivered and people start starving en mass. History is very clear on this point. Could be a while. You will know when we are close when governments really start pushing for laws against any technology or actions that would make you self-sufficient.
Could be as simply as havng a fucking rain bucket.
Greenhouses in Space.
Drop the food in Siberia or the Pacific Ocean for distribution.
It's already illegal to catch rainwater on your own property in several states...
Fortunately, it is not illegal where I am, and I would flatly ignore any such law anyway.
What better way of government control than forcing the populace to be dependent on government
More and more people are growing their own food. I was out cleaning up the front yard a week ago, and the parents of a childhood friend drove by. I haven't seen him in probably 5 years, and his parents said that he was setting up a garden for his girlfriend, and that his sister had 10 acres and grew all of her own produce. 5 years ago, that was not something that they would have been into. His parents said that they even save their own seeds. A lot of people cannot say what is wrong, but they smell the bullshit in the air and know that something isn't right. My neighbor across the street and both of my next door neighbors grow a lot of their own food too.
This isn't big enough to feed everybody yet, but this does mean something very important: The knowledge base is growing. There are now enough people in my area who have gotten out there, grown things, failed, tried again and succeeded that we could probably go self sufficient on food in one season, given enough seed. And people aren't using just one method, people are experimenting with different methods of growing stuff. The one size fits all mentality only works if you have the industrial might to make one size fit all. How does one grow enough food for his family when he doesn't have access to tractors, NPK fertilizer, GMOs that withstand roundup and pestacides? If supply chains break, that knowledge will be very handy indeed.
The local politicians are even relaxing some of the regulations for small, local farmers. If there is a crackdown on this, it will come from the feds.
YUP!
It already has. A law was passed about five? six? years ago to make sure that no one gets unsafe food by making it illegal to grow anything and sell or give it to anyone else without government approval. Anyone here a little better educated than me on the subject?
Its called GAP (Good Agricultural Practices) brought to you by the ex-congressman Waxman from California. USDA people can close down your farm even if it is GAP approved, as an example was the cantaloupe grower with the listeria problem a couple of years ago. Very costly to get approved, and opens one up to surprise visits that the grower has to pay for by the hour. A dog pooping in a field can shut one down.
MsC.
LawsOfPhyics anser is most correct.
But to me it's like doing a cannonball into the pool. The water goes down with you(deflation), then all of a sudden it changes and burst of water goes straight up(inflation). The water is still going down, but it's about to change maybe starting 2015.75.
I expect the heavy metals rising 2016-2020 time frame. As Armstrong says, "Gold measures you trust in the government" I see IRAs, Pensions, etc to get converted to Tbills for instance in that time frame.
Sorry, but Martin Armstong 2015.75 prognostications don't hold water.
We'll find out in 6 or so months whether he is correct. I think that something is going to pop in the next 6 to 24 months.
I see it as a momentum change date, Nothing particular needs to happen on that date.
Deflation goes on until the unpayable debt is defaulted on. Only then will aggregate demand justify an increase in supply, which in turn will create a virtuous cycle int he economy. Until then we are just caught in the currents at the bottom of the pool, struggling just to stay out of the drain.
so, how does it start (start to end)... stores are busy with buyers (even if they are renters now instead of homeowners).
should I look outside my window for a cataclysmic event?
Would you like a new credit card?
Maybe our leader could take a long boat ride on one of the conainer ships! I saw an episode of Hawaii Five-O where the bad guy was shipped off in a container, never to be heard from again!
Trading places.
When they put the punk in the cage with the Gorilla.
But it's still rising though
They already told you the new Iraq war would start April/May. The puppetmasters will try again in Syria for Assad, and Ukraine is what it is. A slow burn is the best one can hope for...
Ya think? File this under "no shit sherlock. Time to revive those local economies. Fuck em...
The bankers need to repay us just the same...
I remember coming across figures for the import and export numbers for apples in Canada a few years ago.
Something like 150,000tons of apples exported and 180,000 imported.
So net 30,000 tons changed.
300,000 tons were just being moved about. Maybe if we could do more of this kind of thing, BDI would start to go up.
Thing is, the only people really benefiting are shipping companies.
My numbers way be off here, but not so far as to damage the argument.
US exports chicken to China, but US imports chicken from China also.
"The Baltic Arid Desert Index"
How can this happen when the Obama administration released U-3 instead of U-6 BLS data. Color me shocked.
What do you expect the CEO to say? "Our huge loss was the economy and out of our hands" or "I ordered way too many ships and a massive over supply of capacity is killing us"?
its the snow. Snow is like your johnson. its measured in inches, soft to the touch, goes off when you least expect it and it never gets as deep as you’d like it.
"The only real bright spot is the US, and even the US is good but not great,” he added.
The good 'ol Amerikan consumer will never let you down! Got to keep loading more stuff into our rented storage units. The garage and attic are packed full!
USSA!
Americans will have to be imposed on a mandatory spending cap per a month or seek a IRS country club fine for not meeting your minimum requirement to repayment of free reward program points. If you don't keep buying within 30 days, your reward points will be lost.
/sarc
Zerohedge is now recycling my predictions that world trade dies if QE continues.
Not picking on you ekm1. Question for you...
What node of binary code will subsidize three known breakdowns of Globalization success? Might this be Title II FCC? De-globalism is beginning. Winks
Axial Division of Labour
I love debates, what our your thoughts?
Simple historical answer:
War winners win
War losers lose
Did you watch link? Core, Periphery, and Semi-Periphery. Bet the NGO's are having a meltdown and throwning chairs.
Yes and I did and it is all correct.
The only thing missing is explaining who keep the whole thing together:
US Military
ekm-
Sure about that?
i.e. Japan, Germany
Yep. We turned them from competing ideas of civilization into fully-integrated members of the club.
Sure they retain cultural tags but they have been turned into cuisines rather than enemies.
EKM: plenty have posted similar. I've been posting of global relocalization for 2+ years... And it will happen whether the oil/inflation path or the deflation/collapse path. It happens regardless of QE. The reality is that the US (+Canada) is best off competing on self sufficiency.
that makes us 2
If everyone becomes content with their posessions, and quits buying junk, the wheels of industry come grinding to a halt.
The rich slow down getting richer, and the sheeple have way too much time on their hands.
Sooner or later a system built upon a premise of infinite growth, WITH a predicate of < 30$ a barrel Liquid petroleum will collapse.
Our input costs( cost to produce a barrel) are grinding the system apart.
Legacy costs loom within the corporation to become profitable. Why do you think they want millions to cross the border and replace corporate obligations to dishonor pension funds used to build the company. Buyout programs have already been drafted.
what, the US has to shoulder the load so the world's economy doesn't grind to a halt? again?
this is my surprised face
what, the BRICs can't make up the demand shortfall? again?
this is my utterly fucking surprised face
News Alert.
Government's plan is to skip Q2 and Q3 this year and go straight into Q4's holiday season!
Get ready for Christmas 2015!
Not only are packages shrinking at the grocery store.
So is the entire year!
Welcome to the new 183 day year.
Have to start thinking outside the legacy box - the old reality.
It's the 21st Century, damn it people!!!
If current reality doesn't fit the forecast, change reality.
How long will a Amazon drone battery last before shipment arrives in a Obama hood zone. Grandpa Warren is discussing drone insurance shipment policies thru Geico.
/sarc
Is less shipping unambiguously bad?
http://www.gizmag.com/shipping-pollution/11526/
A point for Simon Bar Sinister just because of the logo.
Of course it is. It was all planned as the velocity of money decreases so too does the trade & production. The screw is coming soon. Hang on Greece & don't leave the Euro yet. The big crash is already staged & we will be there for you whe the SHTF !. There will be no 2016 election the USA. The dominos are set & the hyperinflation, droughts, shortages, riots will all be in play. Should be a hoot. Next stop Neo Fuedalism on the Twight Zone Train. Sheeple, it's what's for Dinner.
Next stop Neo Fuedalism on the Twight Zone Train.
Sheeple, it's what's for Dinner.
I like that 'Sheeple, it's what's for Dinner'
slow in = slow out
This trip from superpower to second class is going to be a bumpy ride for Western civilization.
The new US housing market boom can excel under section 8 container Basel III laws to sell offset bloated inventory on Baltic Index container inventory.
http://portal.hud.gov/hudportal/HUD?src=/hudprograms/fhahamp
What a beautiful 2.3 million dollar real estate piece
Zillow is declaring a 5 million property value.
Fuck off NARs. Better head back to the titty bars were you funded your real estate licence.
Should You Add A Securities License To Your Qualifications? Don’t worry. Google isn’t going to give up AD revenue for Porn. Just log into the DarkNet if you don’t believe me, FCC government population control is a Obama riot.
Showing your tits or suggesting sex will close deal. Selling a YUGO might be up your career path. Bet all the US fags, would lease the car for the night for a good buttfuck.
Obama calls that wealth redistribution.
Yugo?
Maybe you are confusing the Baltic Dry Index with the BalKAN Fiat index.
Maybe people are starting to realize they have more than enough shit.
The Baltic Dry Index does not show containership rates.... So why do you use it..?
BDI less relevant nowadays because of massive shipping overcapacity...https://twitter.com/M_McDonough/status/570951650560622592