Global Trade In Freefall: Container Freight Rates From Asia To Europe Crash 60% In Three Weeks

Tyler Durden's picture




 

Three weeks ago, when we last looked at the collapse in trade along what may be the most trafficked route involving China, i.e., from Asia to Northern Europe, we noted that while that particular shipping freight rate Europe had crashed some 23% on just one week, there was some good news: at least the Baltic Dry index was still inexplicably rising, and at last check it was hovering just above 1,100.

That is no longer the case, and just as with everything else in recent months, the Baltic Dry dead cat bounce is now over, with the BDIY topping out just above 1200 on August 4, and now back in triple digit territory, rapidly sliding back to the reality of recent record lows which a few months ago we suggested hinted that much more is wrong with global trade, and the global economy, than artificially manipulated stock markets would admit.

 

More importantly, a major source of confusion appears to have been resolved. Recall that as we noted on August 3, "many were wondering how it was possible that with accelerating deterioration across all Chinese asset classes, not to mention the bursting of various asset bubbles, could global shippers demand increasingly higher freight rates, an indication of either a tight transportation market or a jump in commodity demand, neither of which seemed credible. We may have the answer."

We did. To wit:

"Should the dead cat bounce in shipping rates indeed be over, and if the accelerate slide continues at the current pace, not only will shippers mothball key transit lanes, but the biggest concern for global economy, the unprecedented slowdown in world trade volumes, which we flagged a week ago, will be not only confirmed but is likely to unleash yet another global recession."

As expected, on Friday, we got confirmation that the BDIY has indeed become a lagging indicator to actual demand, when Reuters reported in its latest weekly update using data from the Shanghai Containerized Freight Index, that key shipping freight rates for transporting containers from ports in Asia to Northern Europe fell by 26.7 percent to $469 per 20-foot container (TEU) in the week ended on Friday.

The collapse in rates is nothing short of a bloodbath: "it was the third consecutive week of falling freight rates on the world’s busiest route and rates are now nearly 60 percent lower than three weeks ago.

Freight rates on the world’s busiest shipping route have tanked this year due to overcapacity in available vessels and sluggish demand in goods to be transported. Rates generally deemed profitable for shipping companies on the route are at about $800-$1,000 per TEU.

Other Europe-focused freight rates did even worse, with container freight rates from Asia to ports in the Mediterranean plunging 32.1%, while those to the US West and East coast slid by 7.9% and 9.9%, respectively.

This should not come as a surprise: it was back in March when we first reported that "Global Trade Volume Tumbles Most Since 2011; Biggest Value Plunge Since Lehman."

It took the no longer discounting "market" about 6 months to figure this out. As for the culprit, no question who is at fault.

What happens next?

Well, some, such as the world’s largest container shipping company, Maersk Line, will desperately try to no longer lose money on every transit, with a plan to raise spot freight rates by $1,000 from ports in Asia to ports in northern Europe, with effect from Sep 1. Other major container shipping companies have similar plans.

The virtually guaranteed outcome of this "strategy", as there is simply not enough demand as the world careens off the global recession cliff to offset a surge in freight costs, will be an even greater collapse in trade volumes.

The alternative, is just as bad: as we sarcastically hinted first in March:

... none of the above should alarm anyone: remember - central banks can just print trade with just the flick of a CTRL-P switch.

And then again three weeks ago when we said no need to worry because it is just a matter of time before "central planners learn how to print trade."

For now, however, printing money no longer equates to boosting global trade. In fact, easy monetary policy now appears to be backfiring, as even the "market" has figured out.

 

So, sarcasm aside, what really happens next, to both shipping, trade, the global economy and markets? Sadly, unless central planning finally works after 7 years of failing ever upward... this.

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Sun, 08/23/2015 - 12:49 | 6457896 Dapper Dan
Dapper Dan's picture

This means the EU has enough stuff right?

Sun, 08/23/2015 - 12:52 | 6457904 Never One Roach
Never One Roach's picture
New immigrant crisis on the way: 185,000 migrants flood into Europe in just three months

 

http://www.express.co.uk/news/uk/585501/3-months-migrants-flood-Europe

 

Germany orders Britain – take MORE migrants, as country faces 800,000 this year

 

http://www.express.co.uk/news/uk/600151/Germany-Britain-MORE-migrants-co...

 

Europe is doomed.

Sun, 08/23/2015 - 12:52 | 6457914 IridiumRebel
IridiumRebel's picture

Bienvenidos cucarachas nuevas!!

Sun, 08/23/2015 - 12:53 | 6457920 SheepRevolution
SheepRevolution's picture

The whole damn thing is about to blow.

Sun, 08/23/2015 - 12:56 | 6457927 remain calm
remain calm's picture

Can we get Bernanke back, at least that cocksucker knows how to print money, we got nothing else. NOTHING!

Sun, 08/23/2015 - 13:01 | 6457940 Publicus
Publicus's picture

Doh, technology is reducing the cost of transportation.

Sun, 08/23/2015 - 13:13 | 6457972 TBT or not TBT
TBT or not TBT's picture

Maybe if Draghi and Yellen eject their warp cores simultaneously, the explosion will push us out of the singularity captain!

Sun, 08/23/2015 - 13:14 | 6457981 El Oregonian
El Oregonian's picture

This will not be contain(ered).

S.S Minnow going on a 3 hour tour.

Sun, 08/23/2015 - 14:20 | 6458197 stacking12321
stacking12321's picture

simon ting wong!

 

"Simon Ting @simonting

HK cargo container throughput July -9.5% yoy, recorded 13 consecutive months decline, worst in modern history."

Sun, 08/23/2015 - 14:25 | 6458225 Headbanger
Headbanger's picture

This is what happens when the beleif is there's no end in sight for growth.

That moar is better cause it captures moar market share and lowers unit costs.

Same mistake Japan made in the 80's building moar and moar and moar...

Sun, 08/23/2015 - 14:29 | 6458241 TeamDepends
TeamDepends's picture

>Worst fears realized tomorrow

>PPT stick save

Sun, 08/23/2015 - 14:37 | 6458274 knukles
knukles's picture

It's all them Goddamned electric cars, I'm tellin' ya! 

Sun, 08/23/2015 - 15:55 | 6458576 Automatic Choke
Automatic Choke's picture

Can't they ship all those immigrants in shipping containers?  Problem solved!

Sun, 08/23/2015 - 16:01 | 6458611 Manthong
Manthong's picture

Long term immigrant storage.. I like it. But..

“Asia to Northern Europe…$469 per 20-foot container (TEU)

Interesting to note that it costs less to ship an 8.6’ x 8’ x 20’ Twenty Foot Equivalent Unit(TEU) from Hong Kong to Amsterdam than it costs to have an 8’x 8’ x12’ PODS shipped from Maryland to VA.

http://www.consumeraffairs.com/movers/pods.html

Sun, 08/23/2015 - 16:33 | 6458757 janus
janus's picture

immigration is an easy problem to solve. 'israelis' always and without exception aggressively promote 'universalism' and open-borders in every country they contaminate...and so, it stands to reason that they'll enthusiastically welcome all these 'political refugees', give them unlimited benefits, abandon the prohibition on inter-ethnic marriage, enroll them in their schools and greet them in their neighborhoods there in palastine.  i just cannot fathom hypocrisy from jews -- honest and sincere as they always are; and i reckon the kinnesset will establish hospitable and immanently liberal policies so-regarding forthwith.  

after all, judah, what's good for america & europe is good for israel...right?  anything else would be racist.

in fact, i think israeli aid should be contingent on the passing of these progressive policies.

janus

Sun, 08/23/2015 - 17:28 | 6458965 delacroix
delacroix's picture

an african israeli president.  I LIKE IT

Sun, 08/23/2015 - 17:33 | 6458987 janus
Sun, 08/23/2015 - 23:40 | 6460550 Manthong
Manthong's picture

My Nominee:

 

https://www.youtube.com/watch?v=79KzZ0YqLvo

 and this one is really interesting:
https://www.youtube.com/watch?v=PnvbAGiujOQ

Mon, 08/24/2015 - 02:45 | 6460953 cookie nookie
Mon, 08/24/2015 - 05:18 | 6461061 janus
janus's picture

thank you, Smith.  for whatever reason your motif -- or whatever you'd prefer to call it -- doesn't wear thin with me.  it's like a fortune cookie, only more satisfying and filling...somewhat a fortune biscuit, or possibly a proverbial scone.  

best of luck with the dragon lady.  i've been told that the sterotypes associated with korea mothers are all totally invalid; that they are instead easy-going, not in any way vindictive, slow to anger, diplomatic and deferential, never hostile or aggressive when insisting on their way and trusting of strangers...but, with respect to the pharmacopial treatment of these virtues, i think you mean ketamine, which is a horse tranqulizer and is known to induce episodes known as 'k-holes', a place where the happy patient may experience bouts of detachment and delusion, and semi-psychotic fits of paranoia and panic are not uncommon.  just keep her offa the soju, keep her busy with the kim-chee, get you a thai mistress, some name brand coca-cola and the rest will take care of itself.

that will be all for now, agent smith...janus is off to rescue some french chics from a roving band of naughty and colicky bears hell bent on havoc.

https://www.youtube.com/watch?v=2msbfN81Gm0

grow apple trees/

and honey bees/

and snow-white turtle-doves,

janus

Mon, 08/24/2015 - 08:54 | 6461789 robertocarlos
robertocarlos's picture

I'm a god damned agnostic and I enjoy reading your blog.

Sun, 08/23/2015 - 18:23 | 6459162 THE 4th Quadrant
THE 4th Quadrant's picture

Ebony, ivory, jooery?

Mon, 08/24/2015 - 06:17 | 6461133 MSimon
MSimon's picture

You are just jealous of Ron Jeremy.

Sun, 08/23/2015 - 18:09 | 6459104 booboo
booboo's picture

well moving them one at a time down an interstate is less efficient than one ship floating 16,000 of them across an ocean.

Sun, 08/23/2015 - 18:36 | 6459218 Urban Redneck
Urban Redneck's picture

I also don't know too many people with loading docks and and gantry cranes at their residences... or trucking companies that have term route obligations that necessarily create "POD-sized" excess/underutilized capacity when demand drops.  

Sun, 08/23/2015 - 21:36 | 6459976 Paveway IV
Paveway IV's picture

God, I'm getting sick of the used container blight. There's tens of thousands of those rusty damn things piled up in my city and they will never be used - we don't manufacture jack any more. They're worse than pastic bags. And I don't care what clever uses people can dream up for them, they're a f'king eyesore in any urban setting. I'm expecting my neighbor to have one dropped in his back-yard for some idiotic reason pretty soon. He'll use it for a giant doghouse, a party shak or maybe a spare bedroom when his extra-and/or-missing-chromosome inlaws come over to visit. They're good for storage or a hunting shack if you put it miles from where anyone can see it, but nobody ever does. 

Is there something special about those things that they can't scrap them? I thought they were made out of Corten steel. Too bad they're not made from wood - you could at least burn the damn things and get some use out of them.

Sun, 08/23/2015 - 21:44 | 6460020 sleigher
sleigher's picture

Reduce Reuse Recycle.  These are the words to live by man.  Mother earth gives you life and love and you should cherish her gifts, brother.  You come down on your neighbor for seeing and living the love and that is a sad day for our all of us.  (takes another bong hit)  Like we're all in this together man.  Be cool.

Sun, 08/23/2015 - 22:44 | 6460284 Paveway IV
Paveway IV's picture

I'm all for reusing those things. I wouldn't mind looking at something like this in his back yard for the next decade. 

The problem with my neighbor is that I will end up looking at this party shack for the next decade, except he will not bothered to have spray-painted over the five-foot tall COSCO or Hyundai logo with brown primer. He will simply remind me that he's planning on painting it over, which puts it somewhere in a five-year timeframe, plus or minus two years.

The only thing I have going for me is that he would have to pay a couple of grand for one and then pay to have it dropped. He's way too cheap for that. If he can't drag it home on his boat trailer (he doesn't own a boat) then I'm probably safe. I'm worried that he'll get an old beat-up one for free and have one of his mobster friends that works for the city drop it for him.

Sun, 08/23/2015 - 23:27 | 6460491 macholatte
macholatte's picture

 

+10 rant Paveway

LMAO

Mon, 08/24/2015 - 08:37 | 6461656 sleigher
sleigher's picture

Honestly I am with you.  I hate even seeing in my neighbors backyard.  Much less some giant rusting box or whatever...

Think I had a few too many last night.  :)

Mon, 08/24/2015 - 02:31 | 6460937 Adahy
Adahy's picture

Not trying to be a bitch here, but this comment struck a nerve.  I normally love your comments Paveway; but this, to me at least, just sounds like wanting to tell people what to do just because you do not want to look at something.
Maybe you can get a law passed that can tell them what they can and can not have on their property.  I love those...

Mon, 08/24/2015 - 02:34 | 6460938 Adahy
Adahy's picture

Now if I was your neighbor, I would just save up and move to a more rural area if possible.  That way, everyone wins.
Fuck the city anyway.

Mon, 08/24/2015 - 22:06 | 6466874 Paveway IV
Paveway IV's picture

"...but this, to me at least, just sounds like wanting to tell people what to do just because you do not want to look at something."

Nope - let me make this clear: there is no telling my neighbor what to do and he wouldn't give a damn anyways. He has lawyers on speed-dial - he tried to sue the paper boy and newspaper for some nonsense. He's THAT kind of guy. 

I live in what was a quiet old neighborhood. Lots of retirees that took care of their simple but neat little houses, mowed their lawns and generally respected each other. They're the kind of people that would come over and apologize because they thought the smell of charcoal lighter fluid they used to start their grill that afternoon might have annoyed you since the wind was blowing your way. It's the kind of neighborhood where we all mow the older residents lawns for them just because.

My potential-shipping-container neighbor does occasionally mow his lawn, but refuses to mow the three-foot strip of boulevard in front of his house 'because it's city property' (it's not). His favorite pastime is waxing his expensive SUV and pickups on the weekend with the sub-woofers on 11. He likes screeching-ass glam rock, and his wife and kids love rap - the more profianity the better, because everyone want's to hear bass-enhanced songs about some "doggin' dat niggaz' bitch" at 9:30 A.M. on a Sunday morning. I would love to open my windows when it cools off on a late summer evening, but between this guy's blaring six-foot plasma TV and the bar-like second-hand clouds of smoke (some from cigarettes) spewing from his house... well, I would rather just shelter in place. I think I mentioned his annoying, psycho Rottie that really needs to be on industrial-strength tranquilizers. Actually, I feel for the dog - he's probably gonig insane trying to escape from that madhouse.

There are suburban neighborhoods with big lots and pleny of bushes/trees, or semi-rural neighborhoods where you can't even see the neighbor's back yard. I don't live in one of those places, and my neighbor could care less. He hasn't won the lottery and doesn't have that great of a job, but just renewed his 'fleet' of pickups and SUVs - must have been $120K for all the new toys. I'm pretty sure he stopped paying his mortgage a while back. With any luck, him and his f'king boat trailer will be gone soon. Believe me, the entire neighborhood will throw a block party on that day.

Sun, 08/23/2015 - 22:25 | 6460114 Teshuvah
Teshuvah's picture

Many people have had dreams or visions of Asian soldiers arriving in shipping containers to attack the U.S.  Zelma Kirkpatrick had a visions like that in 1954.  http://www.ubm1.org/?page=zelma - Henry Gruver did later on.  I did in 1996.  Others have seen mushroom clouds over cities, empty burned out cities, foreign soldiers rounding up people, missiles falling, fallout, etc. 

China to Retrofit Thousands of Merchant Ships For War - 19 Jun 2015
https://tobefree.wordpress.com/2015/06/19/china-to-retrofit-thousands-of-merchant-ships-for-war/

Mon, 08/24/2015 - 04:51 | 6461041 jaxville
jaxville's picture

  Red China has a huge army but lacks the logistics to move and supply that army over long distances.  If the story you provided a link to is accurate,  things are about to change.

Mon, 08/24/2015 - 05:41 | 6461079 Teshuvah
Teshuvah's picture

Quote from 1999: 

"Although presented as a commercial entity," according to the House Task Force on Terrorism and Unconventional Warfare, "COSCO is actually an arm of the Chinese military establishment."

The Clinton administration has determined that additional information concerning COSCO that appears in the Select Committee's classified Final Report cannot be made public without affecting national security."

PRC Acquisition of U.S. Technology
PRC Purchase of Interests in U.S. Companies

The Cox Report

Mon, 08/24/2015 - 01:01 | 6460797 The central planners
The central planners's picture

Instead of inmigrants, why dont ship those jewish bankers to far Siberia?

Sun, 08/23/2015 - 15:01 | 6458360 tenpanhandle
tenpanhandle's picture

My worst fear is a PPT stick save.

Mon, 08/24/2015 - 01:08 | 6460810 Socratic Dog
Socratic Dog's picture

That's not my worst fear.  My worst fear is full-fledged commercial collapse this week.  That's collapse with a capital C.  Many here have been expecting it, many have been preparing....maybe this really is it.  My second-worst fear is that I discounted the signs and didn't take last-minure precautions... like ordering fresh vegetable seeds, getting in a few hundred extra pounds of food, topping up the water supply, exchanging extra cash for silver.  Guns can be cleaned and sighting-in checked any time but once commercial collapse really happens, there's no more opportunity to buy that extra sack of beans.

Well, that's how I spent my weekend.  Hope it was a wasted effort.

Sun, 08/23/2015 - 15:15 | 6458415 38BWD22
38BWD22's picture

 

 

Less than containerload (LCL) rates from East Asia - Callao are down for us too (but only some 5% - 10%).  Good for us in the short-run, but an indicator that Peru will soon feel China's pain.

Sun, 08/23/2015 - 15:31 | 6458487 Crisismode
Crisismode's picture

 

 

Izzat you, Do Chen?

 

 

Sun, 08/23/2015 - 21:06 | 6459879 BarkingCat
BarkingCat's picture

Yes it is him, but I would like to know what the fuck happened to his real handle.

Sun, 08/23/2015 - 23:29 | 6460499 macholatte
macholatte's picture

 

 

Yea!

Where's Do Chen?

Sun, 08/23/2015 - 15:58 | 6458596 Steal Your Face
Steal Your Face's picture

I got 3.27 in Barranco on Friday, so that's nice.

Sun, 08/23/2015 - 15:27 | 6458470 J Jason Djfmam
J Jason Djfmam's picture

It worked until it didn't.

Mon, 08/24/2015 - 03:24 | 6460989 FreedomGuy
FreedomGuy's picture

It's illegal immigrants in those containers. The are from the kidnapped ships in Somalia. 

Mon, 08/24/2015 - 00:54 | 6460784 quartshort
quartshort's picture

Yeah... it must be amazon drone deliveries, right? 

</rainbow vomit>

Sun, 08/23/2015 - 19:28 | 6459446 Down to Earth T...
Down to Earth Thinking's picture

That is exactly what TPTB want you to think and spread the word ! Unfortunetaly QE will not work this time around as it did in the last illusion period ? Don't believe me, go ask China or Japan. I will be glad to see it all fold so we can get on with something REAL ! Although there will be blood in the streets.

Sun, 08/23/2015 - 21:08 | 6459886 BarkingCat
BarkingCat's picture

The only way QE type print would work is if they gave the money directly to the peasants.

Mon, 08/24/2015 - 01:01 | 6460798 cro_maat
cro_maat's picture

WB and others have predicted the helicopters of cash for quite a long time. Not sure Mr. Yellen has it in her / him / it. Quite distastful to hand out the magic sauce to useless eaters even if that is their only hope.

I think they will listen to Krugman and break more windows (think chemical and ammunition dumps).

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