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Global Trade In Freefall: Container Freight Rates From Asia To Europe Crash 60% In Three Weeks
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.
HK cargo container throughput July -9.5% yoy, recorded 13 consecutive months decline, worst in modern history.
— Simon Ting (@simonting) August 22, 2015
@simonting Singapore TEU -13.2% too, worst since Lehman crisis.
— Simon Ting (@simonting) August 23, 2015
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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Chaos was left behind.
Anarchy is a much misunderstood and maligned word.
The concept of anarchism (no leaders) scares the shit out of those who wich to be 'leader' which required the deliberate corruption of its meaning.
Other than that, I would agree.
Machine gun them at the borders of Europe. Put their heads on pikes every quarter mile along the border as a warning. You have no right to be in my nation just because your people and your nation are inferior and shitty.
That worked for Rome for centuries (minus the machine guns).
Just a reminder from the past :
As the East/West trade was what DETERMINED the flux of container rotation from China to Rotterdam; the TEU rates East/West were THREE times more expensive than the rates WEST/EAST; aka return.
WHY? Cos 50% of those containers were EMpty on the return journey. EU exported much less in volume to China !
SO if you were exporting from EU to China/India, like I was, you got cheap rates on containers. We paid 1000-1200 $ for a 40' HC (2TEU) in 2005 (boom times at their best) for traffic to HK, whereas the same cntr cost 3000 $ the other way around.
I wonder what that difference is today?
Here is a link to the 10 yr BDI http://www.economist.com/blogs/economist-explains If shpping is getting cheaper is it because we have more ships in the world or lower prices because of to much inventory on hand , can anyone delineat the exact date when lower prices equaled lower shipping costs versus the original ship orders flooding the seaways making shipping cheaper . a definite line of desembarkation !
Remember what I said, in a previous life?
Cyber hacking will be the largest export from China soon.
They'll never compete with NSA
belief in government statistics syndrome - BIGSS
China has saturated the entire world with SHIT.
BDI is highly correlated to the price of crude oil. There was a significant drop in BDI:WTIC ratio in Oct. 2011, but has been oscillating in the 5 to 30 price ratio ever since (see http://stockcharts.com/h-sc/ui?s=%24BDI%3A%24WTIC ), with a small rally in June 2015 which is now quaking, and likely to collapse.
Alternatively, the Shanghai Shipping Exchange Containerized Freight Index (see http://en.sse.net.cn/indices/ccfinew.jsp has fallen from 1075 (Aug. 2014) to 875 (Jan. 2015), and stayed there.
The containerized freight is the worry, and the cannery in the coal mine for Chinese trade.
hmmm.. Never thought of building a cannery in a coalmine. Killing two birds with one stone I suppose.
I aint no engineer , but this rickety pile of horseshit we call an economy is looking a little shaky
A house of cards built on a sand castle built close to the waterline at low tide.
I'm an engineer but I ain't no economist and I agree.
Hey engineer - I first saw those pics of the cargo containers collapsing off that ship weeks ago - how can they still be hanging in there?
Engineers needed over at ZH's Lake Mead article immediately !! It was written (and fact-checked) by an economist.
gcjblack said " BDI is highly correlated to the price of crude oil. "
Thanks for pointing out the apparent relationship between the two. I did not know that.
Container shipping rates are one indicator yes. Also look at airline rates such as R/T to Asia they are stunningly low. Must be a lot of half full flights.
Oil is also a big part in BDI calculations.
And then there's the fact of all those monster containerships that entered into service this year which add to oversupply.
After years of overinvestements in the shipping sector, the BDI has become worthless as a indicator.
Waiting with baited breath for QEternity.
I have an idea. Use shipping containers to transport illegals into Europe. This should ease the pain for the shipping industry.
And then when Europe gets rid of them they can use the containers to transport them back again.
A few times back and forth and the whole problem will go away.
They are not 'illegals' - The 'Coalition of the Willing' has made them - simply- HOMELESS !
I see that very few acknowledge the true reason for oil price collapse. The reason, which was repeatedly stated by Saudis, Russians and Chinese. All of them say this is the demand collapse stupid.
And demand collapses because of rampant inequality in societies throughout the world since people are loosing income, paying off the ever-increasing debt and cut the investments and expenses to the bone or desperately engage in gambling on stocks.
That's why Saudis are trying to suppress fracking not to completely lose influence on US market after they lost Chinese and Indian market to Russians and Iran as a part of trade dedollarization efforts. As far as fracking itself is concerned, the industry is extremely over-leveraged, massively loosing money as we speak regardless of any technological improvements.
We see this desperation with unsound mining practices technically maximizing production over existing rigs, shortening their longevity to pay bondholders and survive another day. As soon as interest rates normalize (if ever) or banks will not be able to sell their junk bonds, they all will go bankrupt if Saudis keep the price low and they will for their own survival. We are just waiting for all the $90 hedges to expire and that’s will be it or another massive FED bailout, this time it would be junk bond holders.
As a result of geopolitical tension between US and Russia Saudis are step by step moving towards accommodation with the eastern powers to balance Iran support by Russia and China.
Just recently the number two sheik, defense minister of Saudi Arabia is in S. Petersburg, Russia talking about energy and military cooperation and perhaps purchasing weapons. It is clear political shift indicating much more independent new monarch who rebuked Obama just few weeks ago and without clearance from Washington attacked Iranian interests in Yemen.
The Saudis even substantially reduced purchasing of US treasuries, a historical development challenging of petrodollar. The even star selling bonds to cover budget deficit due to their currency peg which will break soon as in China mostly due to war spending and invasion of Yemen, since one cannot wage a war without freely printing money.
One way or another with big oil companies abandonment of the projects, the future of the shale industry is bleak and probably will be with marginal importance in the US. Already fracking has been almost abandoned in Europe since nobody want to challenge Saudis.
The FED does not understand that it is not assisting world financial system it IS THE FINANCIAL SYSTEM since it killed and burred all the markets, incapacitating them before 2008 and killing them after.
They are fixed on so-called liquidity while what they do is destroying liquidity for those who want to invest in the real economies.
With all the moral hazard and implicit TBTF status who in their right mind would put their money anywhere else but into blowing bubbles as a method of killing non-TBTF competition and as we result concentrating the capital in few hands of cronies. It has already happened.
But what now? $’s loosing to euro, two choices unleash more ECB QE or the small interest rate hike by FED to preserve German exports. Will see what fraulein (being too kind) or alte Frau Yellen will do. Worry about Jewish lobby??? Look at 800 pounds German Gorilla aka Angela in the room eating your lunch. For Germans to export is to dominate the world.We will see how much they dominate the FED.
Here is what the “injection of liquidity really is all about in simple terms:
https://contrarianopinion.wordpress.com/2015/01/28/liquidity-of-blood-sweat-and-tears/
and on the real economy:
https://contrarianopinion.wordpress.com/economy-update/
Controversial but interesting take on the so-called shale revolution I found at:
https://sostratusworks.wordpress.com/2015/01/15/the-shale-game/
Saudi's are running out of oil - The US stole ALL their gold that was stored in Switzerland - Oil is 98% of Saudi GDP - Fact is the Saudi's will never be relevant again . Just sayin !
Germany is little more than an American house pet. You shouldn't even think of Germany as a nation at all. It is a territory populated largely by Germans (declining rapidly thanks to mass non-German immigration) under the control of the Anglos, French, and Israel.
Auslanders raus!
the price of container living in san Francisco should go down, I think this container living is going to be Americas,"obamacare", fema-witz.
looks as if the Europeans don't have any money to buy anything either.
Europe is by and large a very poor continent unless you are born into an old money family. The workers give over 50% of "their" income to their governments and their governments turn around and use that money to bring in millions of illiterate, violent, culturally alien foreign tribal invaders from Africa and the Middle East. The typical welfare case African in Sweden brings in multiple times the typical salary of a Swedish worker for doing nothing at all. Same in the U.K.
All going as planned. Destroy all borders, destroy all economies.
Next thing you know you have a "One World Odor."
Brought to you by Mr. G Soros, MSN, Googoo, and FlakeBook.
Brought you you by the zionist kikes to dominate the goy who they as cattle to be exploited.
Look at the names of all the players and in all key postions.
Connect the dots.
It's the kikes, stupid!
"central planners learn how to print trade."
they better figure out how to print joules - if they can have nirp why not > 100% thermodynamic efficiency?
They can always run fewer, smaller boats and stack the containers to the gills, like passenger airliners do. According to that picture above they aren't nearly high enough yet, all they lack is bigger straps.
Arabs, from Morroco on the Alantic to Iraq. 600 million +/-.
It would be nice if the daily income per person was over $1/day.
It would be nice if the entire Arab world had a combined GDP greater then Norway.
It would be nice if Arabs manufactured a single world class product.
It would be nice if 600 million had a single world class university.
It would be nice if more than 50 books a year of all types were translated into Arabic.
About 50% illiterate.
More..source UN Arab Development Report.
Life is hard. Its harder when you are incestious, ignorent, unlearned, dirt poor, anti most everyone.
They are too busy fending off the US !!
Since the end of the Midde Ages Jack?? Try again, learn some history, then try again..
Correct, they are illiterate in their native language and functionally retarded when dropped into a Western society. Any non-white foreign tribal invader is a charity case and no more than a housepet for life. Them and their litter of 10 kids.
Well, they should be able to get by. With their side jobs of beheading, bombing, rapeing, ravaging, and plundering.
You forgot LBY before the NATO Oil Pillaging and Gun Running Coup
http://www.globalresearch.ca/destroying-a-country-s-standard-of-living-w...
http://www.globalresearch.ca/libya-from-africas-richest-state-under-gadd...
They allgedely had less people living below the Poverty Line than NED.
Oh Im sure they will have their renaissance once they adapt and.acclimate to eurpean culture.
Aint that right Heywod Jahblowme?
Perhaps time to revisit that Economist cover:
http://globalfreedommovement.org/wp-content/uploads/2015/01/Economist-co...
Tens of millions of illiterate, violent, diseased foreign tribal invaders demanding handouts ought to fix this place right up!
I hate to bring on some more bad news; but don't we have several "Silk Road" Projects in the Making? With that and the Arctic Sea Lanes opening up during the warmer months, I don't think we're going to see a good deal of shipping picking up along the Southern Eurasian Continent - especially for Traffic originating/passing through HKG and SGP.
Most of the container traffic btwn CHN/JPN/SE_ASIA and EUROPE may go via Rail and Roadways.
Now...
http://www.seat61.com/SilkRoute.htm#.VdpXJZf7vtQ
...and the Future...
https://en.wikipedia.org/wiki/Trans-Asian_Railway
As much as I "Like" Shipping - I defended Sealanes via the US Navy - "Eurasian Traffic" is going to rely more on Rail.
On top of the E.U. economic problems, there is also the refugee crisis. Germany (population 81 mln) is expecting to receive over 800,000 refugees just this year alone, 40% of the E.U. total. If Greek crisis and Russia's economic counter-sanctions could not break up the E.U unity, then this massive wave of Muslim Arabs, Afghans, black Africans and other alien cultures has a very good chance to do just that. There is already talk about suspending Schengen Agreement. Btw, parts of the videos at the first link above, remind me the final scene of the movie 'Born in East L.A.'
Saturation point has been reached, for American households absorbing Chinese recycled garbage.
Everybody has storage sheds full of useless junk.
No room for more.
Good screw global trade buy local.
God Bless Craigslist.
Made in America, old stuff but still working.
Say I opened an online account and put 10k on shorts. Do they let you do that stuff? I don't do that sort of thing but I might have to here because it is time for a major correction. Way worse than last week I think. There is going to be some pain but not for me and I would love ride the bastards backs down. All of those years. What comes around goes around and I am just waiting.
It will take about 2 quarkseconds, or 27,000 nanoseconds to front run, hypothecate, de-hypothcate with deravative, both + and -, to eat ur change.
Geez!
There's at least 2000 hft's lined up to make their daily snort bill, at the open.
I was just saying tortuga. I have the cash to do it and I would go bigtime short on social media. I can grade coins but I don't know about doing trades online. Over the years, I have been watching. I am extremely conservative and I trust no one. That is why I think it is important to note that the market is oversold. I want to buy Russian rubles right now but that is not so easy. No, not digital ones. I may not have the best collection in the Untied States but I have more of than most do and it is real. I have some pretty rare Russian coins no doubt.
Then again, a guy can't only focus on one series/nation. That is where the "fun" comes in. Maybe I should stick to numismatics. I am getting too old anymore and I don't need anymore girls besides Mrs.M and our daughter. "Hey babe, do you want to check out my coins?" No, that does not work. The monetary theory debate doesn't work well either with chicks.
It's going to be something with me with my daughter as it has already started. I have a lot to learn yet in life. I don't want her with a male at all but she will do it anyway. I can't stop it. I hope I did a halfway decent job as a father so far.
That is going to be my real test.
No worries.
Those gentlemen west and east coast dock workers, and their valets, will still be paid.So, we've got that going for us.
Actually, the big money's the discounts (subsidies) the shipping companies are demanding off the West Coast Port Authorities. After issuing bonds to build new facilites the shippers demanded, they're being told they have to pony up $60 and up per container they handle.
But the Port Authorites are GUBMINT! so nobody really cares.
Hmmm - the number one operational cost of big container ships is fuel which has dropped how much in the past year? That has to account for a big chunk of the drop in the Baltic Dry.
Not to suggest it shouldn't be lower still with the slowing global economy.
I'm pretty sure with oil at <$40 right now in futures that no oil producing country will put oil on the market very very soon. Why would you? If you are going to go broke why bother? Right?
Let's give this a few weeks.
When? Mid September?
They cannot stop pupping even at a loss. The people who live in those countries wIll revolt if the petrol revenue stops.
Those revenues and the social programs the income supports Is all that's keeping those in power, in power.
They cannot stop pupping even at a loss. The people who live in those countries wIll revolt if the petrol revenue stops.
Those revenues and the social programs the income supports Is all that's keeping those in power, in power.
Looks like I picked the wrong week to quit sniffing glue.
Now that's what's called a CRASH!
awesome, I want a sweet rust free car from japan... cheaplike
There will be interruptions in the supply chain.
Americans can use those shipping containers to live in now instead of using them to buy cheap Chinese junk.
In a shipping container, down by the river.....
THINK:
$469 per 20-foot container.
from ports in Asia to Northern Europe.
So, get one of those containers decked out as a cabin, and you have the 'poor-man's' cruise lines.
That's cheap if you think about it, compared to a major cruise line.
So, what is the problem?
O/T: "A massive fire has engulfed a warehouse at a steel plant located near Tokyo's Haneda Airport, sending thick black smoke into the air."
http://www.rt.com/news/313176-tokyo-factory-blaze-airport/
Economists must see the basic fundamentals.
With oil available at around 1/3 price , the transportation costs have to tumble across the globe. That would lead to decrease in production costs and ultimately to lesser priced goods (& services).
Its the banksters who would suffer most becuz the expected gains from the already paid out loans would become less & less & businesses running on big loans would become unsustainable leading to bankruptcy.
Those businesses which rely low on loans would thrive .
When the cost of doing business internationally goes down, why is this presented as a bad thing? If you are in the shipping business, it sucks, For everybody else, it's good news.
that's what pushing on a string looks like
castles made of sand, fall in the sea..eventually..
Three weeks ago... something snapped. An epic understatement.
Three weeks ago, Obummer announced retaliation against China.
Big Mistake.
Just to add to this conversation relating to shipping from Asia and ports. Investors in HK have been working with Mexico to build the "Mexico Superport". The plan was to ship into Mexico instead of U.S. West Coast ports to avoid taxes, fees, etc. The freight would then be trucked via the NAFTA Superhighway (now disguised at the "Nasco Corridor" and ship product to the U.S. using Mexican Trans Border Truckers who earn $12,500, through a regulation-free network of roads established in the U.S.
Sponsorship in the Nasco Corridor has come from many of the "Beltway Boys" as shown on their site http://www.nascocorridor.com
The regulation-free highway for Mexican Truckers only can be found at http://kcsmartport.thinkkc.com/site-location/trade-corridor-maps
The west coast port industry adds $32 Billion a year to the economies of west coast states. The average U.S. Trucker makes about $42,000 compared to the average Mexican Trans Border Trucker who earns about $12,500
We need to get millions of Americans who were screwed by Nafta, overrun teh sea ports, and this new scam road thing, and dump the Chinese and European made crap into the ocean or burn it.
What we need is a tea party, a real tea party. Millions of Americans show up at the sea ports, and dump thousands of shipping containers filled with crap from China into the ocean. That would help the USA.
It has a market, mothers desperately trying to entertain overstimulated and sleep-deprived toddlers so they can think. Canada's imports from China are a higher quality.
How about a gin & tonic party, with a twist of limb. Las Vegas, Sept 23. We can