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Global Trade In Freefall: China Container Freight At Record Low; Rail Traffic Tumbles, Trucking Slows Down
Over the past year we have regularly contended that a far greater threat to the global economy than either corporate earnings, currency devaluations, rate cuts (or hikes), reserve outflow, or even the stock market, is the sudden, global trade crunch which has been deteriorating rapidly since late 2014 and has seen an even more dramatic drop off as 2015 is winding down. Actually, that is incorrect: global trade is merely a manifestation of the true state of the above listed items.
First, there was ships.
Back in March, we reported that "Global Trade Volume Tumbles Most Since 2011; Biggest Value Plunge Since Lehman."
Then in August when we first pointed out a dramatic slowdown in the Baltic Dry index which had peaked just a few weeks earlier and we said that "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."
Three weeks later, we 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.
Fast forward to the latest update from the China Containerized Freight Index which as of October 30 has fallen about as far as it ever has in history: at 744.44 it was the lowest on record which suggests that beyond the headline propaganda of some nascent recovery, global trade has literally fallen of a cliff.
And while one could try the usual excuse and blame an excess supply of ships, while ignoring the fact that a third of all containers shipped out of the ports of LA and Long Beach port are now empty...
... apparently a supply which was "not there" earlier this year when the Index was more than 50% higher, that excuse won't hold when looking at what is going on inside the US itself.
Then there was trains.
According to Reuters, "freight carried by major U.S. railroads fell by 7 percent in the second quarter of 2015 compared with the same period in 2014, confirming that large parts of the industrial economy are in recession."
It adds that the major Class 1 railroads carried 431 billion ton-miles of freight in the three months ending June, down from 463 billion ton-miles in 2014, according to the U.S. Surface Transportation Board.
Changes in freight volumes reflect broader difficulties in the industrial economy. Rail operators have been struck by a perfect storm which has hit both their traditional and new business lines.
The main drivers for the slowdown are all those commodities that make the backbone f America's industrial economy:
Coal shipments to power plants, the biggest commodity on the network, accounting for about one-third of total tonnage, have been hit by a combination of environmental regulations and low gas prices. Coal shipments were down by 27 million tonnes, around 15 percent, in the second quarter compared with same 2014 period.
Petroleum shipments, one of the fastest growing sources of new business during the oil boom, fell more than 650,000 tonnes, 5 percent, as production began to peak and new pipelines diverted crude from the rails.
And shipments of sand and gravel, a key ingredient in fracking, plunged by more than 2 million tonnes, nearly 14 percent, as the number of new wells drilled and fracked tumbled.
It's not just these well-known culprits: shipments of a range of other items from chemicals to fertilisers and other industrial supplies were also lower as the industrial economy ran into stiff headwinds from a stronger dollar and sluggish capital spending.
Other sources also confirm that the slowdown in industrial-related freight has continued into the second half of the year. Total traffic on U.S. railroads in the 42 weeks ending on Oct. 24 was down 1.3 percent compared with 2014, according to weekly carload statistics published by the Association of American Railroads (AAR).
Shipments of intermodal shipping containers, which mostly handle manufactured products, were up 2.2 percent but shipments using box cars, tank cars, hoppers and gondolas, which handle farm and industrial products, were down 4.5 percent. Shipments were down in five of the 10 freight categories including coal (10 percent), forest products (3 percent), metallic ores and minerals (10 percent), nonmetallic minerals (2 percent) and petroleum (7 percent).
The downturn has deepened and spread to more sectors as the year has progressed, according to AAR data.
The number of cars carrying coal is down 10 percent so far this year but almost 13 percent in the most recent week. The number of cars carrying petroleum and petroleum products is down 7 percent year-to-date but almost 22 percent in the most recent week.
But the most vocal confirmation comes at the micro level, companies themselves. In its third quarter earnings presentation on Oct. 22, Union Pacific, the largest publicly owned railroad, acknowledged freight had shrink in five of six categories during the quarter compared with 2014.
Union Pacific carried lower volumes of farm products (3 percent), chemicals (3 percent), containers (4 percent), industrial products (12 percent) and coal (15 percent). The only sector to increase was automotive (5 percent).
Other publicly owned railroads all reported falling volumes during the third quarter compared with 2014.
Norfolk Southern blamed a "decline in metals and construction traffic due to softer steel production" and reported a 16 percent in coal volumes. Kansas City Southern reported that its volumes were down 2 percent including a 24 percent decline in frac sand. CSX reported volumes fell 3 percent including a 15 percent drop in metals traffic and an 18 percent drop in coal.
* * *
And then there was trucking.
As reported here a week ago, as recently as 2014, trucking had been booming in what many saw as a banner year.
Capacity was squeezed, and rates were rising, so trucking companies went on a buying binge, ordering everything in the book in preparation for red-hot demand in 2015 and more banner years down the road. But then came 2015.
Among businesses, over-ordering and tepid sales caused inventories to rise and the inventory-to-sales ratio to spike to Financial Crisis proportions. And now businesses are trying to bring them down by trimming orders because they’re having trouble selling more to the middle class, the over-indebted modern proletariat whose stagnant incomes are being eaten up by skyrocketing costs of housing, healthcare, college, and the like – and they simply can’t spend that much on shippable items.
Unusually “slack demand” in September – the beginning of shipping season – after “a quiet July and even quieter August,” impacted most of the nation, except in the Pacific Northwest, where “fall harvests of apples, potatoes and onions rolled to market in vans as well as reefers,” explained Mark Montague, a statistician at DAT.
September looks terrible compared to September in banner-year 2014. It still “looks anemic even when compared to the more typical freight movement of September 2013,” Montague said. This slack demand whacked load-to-truck ratios. And that matters:
Load-to-truck ratios signal changes in the marketplace that are usually reflected in truckload rates. In the past five years, a change in the load-to-truck ratio has correlated at a rate of 0.8 with an immediate change in spot market rates, and a sustained change in spot market rates is typically followed by a change in contract rates, as well.
Since late last year, DAT’s van load-to-truck ratios have been on a declining trend. Every month this year, the ratios were below the ratios in 2014. In July, August, and September, the ratios hit 1.8, the lowest in years. In September, the ratio was 42% below a year earlier:
Trucking is a thermometer for the merchandise economy. It doesn’t track consumer expenses like rent or college. But it tracks exports and imports, manufacturing, distribution, retail, and other sectors. It tracks a big part of the real economy. And the sudden slowdown in the trucking industry is another wildly flashing signal in our recession watch.
* * *
We have in the past joked that the only thing that could possibly save the world from what is a trade recession is if the central banks can somehow find a way to "print trade" the way they artificially boost asset prices higher to give the impression of a status quo normalcy. Unfortunately, as this is not a real option, and with both global and US trade in freefall, many wonder just how will the world's central planners mask this most dangerous aspect of the global economic slowdown?
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but Art Sales are at recort highs...
New York: Record $500m Auction of Billionaire’s Private Art Collection Kicks OffNow get back to your Kool-Aid.
So this means a significant tightening and stock rally in December, or am I still dreaming?
Nothing to see here, rate hikes are right around the corner. But seriously we are going to have a major correction soon my guess is that Christmas sales will be in the gutter and 4th quarter reports will be horrible for retail and that may trigger the "great reset".
WTI Going to 20s.
Timber!!
RIPS
LOL!, yes, the "official" price will be very low. Actually taking delivery will be something else altogether.
You still haven't learned. Bad news is good news because that means more QE which means more money going into asset classes. Good news, still remains good news as this means the algos will pump things higher.
China devaluing currency was a short term ABERRATION, because as you know, computers will chase computers until our overlord's proxies can get things under control and pump them up again to promote CONSUMER CONFIDENCE.
Facebook don't need no stinkin boats, trucks or trains. Our new economy is about buying and selling nothing with fake money. Cool, huh?
Christmas sales will be in the toilet....
...nothing will trigger the reset, because Presidential Plunge Protection Counterfeiting Fed Fueled Machine Team is still very alive and well.
This is actually good news. Americans are finally reducing the amount of cheap Chinese crap they buy. The lesser the amount of this junk being transported around the globe the better off we all are. Reducing waste and poorly used resources is actually good for the world economy.
Perfectly apropos!
For those who are not familiar with etymology of this idiom :
Nearly 1000 people suicided by drinking Kool-Aid laced with cyanide in the 1970's (except the children who were murdered by being force-fed the poison) : http://www.history.com/topics/jonestown
Amazing what happens when the world's disposable income gets sucked in the derivative maelstrom.
They should never have passed ObamaCare
fools
Global 'Hope & Change.'
Meanwhile gold and silver are getting drop kicked again by the cartel.
PM Fund Manager warning cartel is about to take out the $1070 stops in gold...which means gold likely headed to $950...
Yah, headline grabbing story. If you look below the surface all, sorts of decorative antiques are way down. I just bought 150 year old Chinese porcelain for 1/2 what it sold for at Sotheby's in 1986! I also bought a late 18th century Boston table for $300 that would have cost me $1500 in 2006. It is only the rarest with the best family history that is bringing top dollar or the latest fashion in the classy decorator magazines.
Foot traffic in my store is down 80% from the 1980s. The phone rarely rings (except for the daily tele-marketer robo calls) and very few e mails.
iphones are getting smaller and lighter, so less freight volume? Sounds bullish to me.
In other words, the ship has hit the fan.
Is it too early to blame the weather? That one never gets old.
It's for the children
No! weather is one thing but dammit man, reduced "Santa Claus" delivery's at this time of year could suck retail into a tornado and the aftermath would be epic.
Avast me hearty's, Raise the Interest rates flag Capn Yellen or the ship be doomed
#sarc
Who needs physical trade when you can send binary code back and forth between central banks.
Everything is awesome, just make sure you are not the zero!
#bringbackourmiddleclass
Hey don't worry because health insurance premiums are up! Thanks Obamacare! <sarc>
This gives me an idea, "Doc in the Container"
Besides I have been waiting for these things to go on sale. spray 4" of closed cell foam on the inside, cut in a window shaker a few outlets and you will be living the American Dream along with the rest of us.
Personally, I'd rather put the foam on the exterior and glue something over the top of the foam. Living in a sardine can with plastic foam out gassing could be injurious to your health. Using a shipping container or a freight car is a pretty good idea, stackable too.
Rising premiums will increase GDP? You can't make this stuff up! But I sort of just did.
AP Moller Maersk report friday 11/06/15
might prove interesting reading
http://investor.maersk.com/financials.cfm
still cant figure out why i'm paying $3k / 20' to the M.E.
Aren't those containers falling the wrong way? Must be in the southern hemisphere.
How little Freight is really for the necessities...
Guess we will find out one day
What a glorious recovery this has been.
Bloomberg says it's the worst earnings season since 2009 - like earnings mean fuck-all these days...
http://www.bloomberg.com/news/articles/2015-11-04/this-is-the-worst-u-s-...
fuck bloomberg
the owebombacare premiums drank your milkshake bitchez
Nobody could have seen this coming!
bloomberg world equities market valuation has crashed over 19% since may 2015.
fuck bloomberg world equities market valuation
Wait until the automation factor hits all the factories. No need for cheap labor as the labor cost will no longer be a factor for most products.
Most of the finished goods freight on the seas will disappear as it will be vastly cheaper to build at the market location. When the factories are relocated back to the US, rail and truck volumes will still stay the same but ocean is going to get clobbered extremely hard.
Will the automation be like the self checkout lane? /sarc/
problem solved: send the empty containers to the nearest border until it's filled with i'magrut freeloaders then drop'em on dc until you can no longer see it dc.
Trucking isn't slowing down where I live... I was in my daily 2 hour traffic line yet again.
2 hours per workday..
Lets say 250 workdays per year, or 500 hours per year. On the basis that we sleep 8 hours, that's a month every year doing nothing but sitting in traffic.if you do that for your entire life you'd spend 4.5 years of it in traffic.
Surely there is some free shit you could be collecting if you just stopped by your local 'benefits' office. Claim a disability, go insane, at least get an EBT card. Worst case, they'll throw you an Obamafone. Stop working so hard and fighting thru traffic. Start collecting free shit today!
I suppose I'd have more confidence in a transport report if the author didn't suppose shippers could mothball transit lanes which are really just lines on a nav chart or course vectors in a GPS program. Containerboard prices and scrap copper prices are the closest indicators to real-time production if you don't watch sales tax data.. When YUM and MCD and KO and NVS report stiffled revenues, you know which way the wind is blowing.
I used to commute 50 miles from North Platte to Sutherland, Nebraska every day but that was with zero traffic signals and I was a 19-year-old boilermaker.
If you are doing 2 hours a day of red light roulette, you have to ask yourself if it is really worth it.
Glad I learned to "just say no".
I used to drive from Stuart to Miami -- 101 miles -- to teach at a college. I tried to arrange my schedule for back-to-back classes, but even then, I realized that nothing, not even tenure, was worth 100 miles, twice a day, on I 95.
I quit.
Yet the "market" keeps going... sigh.
Just finished a pretty thorough look at how USDJPY and CL-fueled algos have driven US stocks higher, with a focus on the past five weeks in particular. If you'd like to better understand the daily machinations that allow stocks to knife through overhead resistance, have a look.
http://pebblewriter.com/how-they-did-it/
What is SPX in your blog?
no fear,come Jan
rates will pick back up once everybody(stores,etc,etc) has to ship back all that xmas unsolds
there,i fixed it
good for another 300 on the dow.
China ratified the AIIB today and the IMF delayed the Yuan inclusion in the SDR decision again....China Freight Index heading way lower. http://banksterbubble.com/china-moves-forward-with-aiib-bank/
China are preparing for the WAR - The Spratlys will host Russian anti - missile defence systems - The Chinese didn't build islands so they could holiday there - Tianjin was an attack on China - Sinai Airbus disaster was an attack on Russia - my guess is that they have had enough - Russia and China will be virtually impenetrable - they have little option(other than War) NOW !
$20 Oil.
FINALLY my lack of spending is working its way through the system!
On some things we do agree. Kudos to the Kommandant.
US: I have nothing to trade.
China: Neither do we
Except shots
Main Street is hitting the wall . . . created by inflation in basic necessitities like clothing, meat, vegetables, insurance (including healthcare) in absentia of rising real wages. The banksters can conjure currency all they want, and that will cause inflation in parts of the economy (rare colored gemstones, colored diamonds, 200+ mph sportscars, wine, art, stash-pads in global financial centers), but it wont cause consumers to spend a greater % of their income on economy-boosting shit. Debt has done all it can to boost consumer spending. So the mirage the banksters have created will soon fall away, and we'll all see the man behind the curtain. There are 3 options: global war, large scale civil unrest, or a doozy of a recession. We're very close to needing a decision. I'm hoping for recession/bankruptcy.
Good news is China went from shipping in 120 days to shipping in 30. Bad news it now takes 4 times as long to fill up a container, so it’s a push.
Nah everything is great, never better in fact.
Now repeat after me...
UK round up:
Tuesday:
Michelin to close tyre factory in Northern Ireland
Standard Chartered to axe 15,000 jobs
Wednesday:
The UKs CAT, JC Bamford lays off 300 of its 4000 UK staff - JCB to lay off nearly 300 staff after dramatic fall in export orders
UK current account deficit: 5.1%
UKs fiscal deficit: 4.9%
This is a sinking ship, small enough to ignore but big enough to make waves when it goes down.
Sell the freight containers and install outside the White House perimeter. Uncle Tom Obama can live within a sanctuary city. The hoodrats can play this on repeat.
The Cult - She Sells Sanctuary (Official Music Video) + Lyrics ...
Don't forget to align the cargo container's to amplify the highest frequency.
The death of currencies implies the death of trade.
For you cannot trade with no means.
And trading for a currency recognized as of no value, is no trade at all.
You cannot hide from a currency crisis in bonds denominated in crisis-currency.
You cannot hide from a currency crisis in company stocks whose commerce cannot collapses without currency.
Everyone wants a printing press.
The great irony, is that given modern computerized printing, the press has never been cheaper.
And as the press has never been cheaper, it is being increasingly recognized that the highly-formalized-shrouded-in-ceremony version passed off by governments, Central and Commercial banks...is not different at all.
You know what the difference between an individual with a gun and printer, and a government/central bank is?
Scale.
Scale. I like that.
I’ve seen this show before. China lowers their price then India lowers theirs. Back and forth they go until we’re back to 2009 prices.
Grandpa Buffett spends more in subsidized ads to lure his Choo Choo train.
Things will get progressively worse each business quarter until everything fails all at the same time. Lawrence Summers, Robert Rubin, and Alan Greenspan, planned it this way when they failed to see anything wrong with their dysfunctional built in systemic risk associated with Financialization, and Securitization schemes. Clearly, these three should be prevented from ever leaving the USA before they bug out for good to a safe zone in hiding.
Here are some signs of a coming recession.
1. Business loans for M&A not CAPEX.
http://www.zerohedge.com/news/2015-10-15/there-goes-final-pillar-us-recovery-loan-growth-paradox-explained
2. Factory orders continue to drop
http://www.zerohedge.com/news/2015-10-02/us-factory-orders-flash-recession-warning-drop-yoy-10th-month-row
3. Default risk spikes
http://www.zerohedge.com/news/2015-10-02/us-financials-default-risk-spikes-2-year-high
4. M&A set record
http://michaelekelley.com/2015/05/29/mergers-and-acquisitions-set-record/
5. Fed sees 2 bubbles
http://michaelekelley.com/2015/02/20/fed-warns-of-two-bubbles/
5a. Commercial Property higher than pre-2007 level.
http://nreionline.com/finance-investment/cre-prices-are-now-officially-above-pre-recession-peak
5b. Global Corporate Debt Market hits $5 trillion.
http://fn.dealogic.com/fn/DCMRank.htm
Here is how to prepare.
http://michaelekelley.com/2014/10/16/8-things-to-do-when-recession-happens/
Here is how to get your mind off this stuff.
http://michaelekelley.com/category/humor/
Good luck!
Yellen: The U.S. Economy Is Performing Well - FT https://www.youtube.com/watch?v=DvIrQNvvzGA