A "Perfect Storm Is Coming" Deutsche Warns As Baltic Dry Falls To New Record Low
Following disappointing China PMI data and a collapse in US ISM Manufacturing imports data, the fact that The Baltic Dry Index has collapsed to fresh record lows will hardly be a surprise to many. However,as Deutsche Bank warns, a "perfect storm" is brewing in the dry bulk industry, as year-end improvements in rates failed to materialize, which indicates a looming surge in bankruptcies.
At 468, The Baltic Dry Index is now at a new record low...
And US Manufacturing imports suggest things are getting worse, not better...
Which leads Deutsche Bank to warn of...A Perfect Storm Brewing
The improvement in dry bulk rates we expected into year-end has not materialized. And based on conversations we've had with several industry contacts, we believe a number of dry bulk companies are contemplating asset sales to raise liquidity, lower daily cash burn, and reduce capital commitments. The glut of "for sale" tonnage has negative implications for asset and equity values. More critically, it can easily lead to breaches in loan-to-value covenants at many dry bulk companies, shortening the cash runway and likely necessitating additional dilutive actions.
Dry bulk companies generally have enough cash for the next 1yr or so, but most are not well positioned for another leg down in asset values
The majority of publically listed dry bulk companies have already taken painful measures to adapt to the market- some have filed Chapter 11, others have issued equity at deep discounts, and most have tried to delay/defer/cancel newbuilding deliveries.
The additional cushion, however, is likely not enough if asset values take another leg down; especially given the majority of publically listed dry bulk companies are already near max allowable LTV levels.
The move to sell assets in unison can lead to a downward spiral, where the decline in values leads to an immediate need for additional equity to cure LTV breaches.
Source: Deustche Bank
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Straw, meet Camel's back!
I’m waiting for the day The Baltic Dry Index turns negative.
Hey, the Fed is still drooling over the Negative Rates, so…. ;-)
Looney
Shipping everything back and forth and back etc. should help the BDI and the oil price. Problem solved. Now go back watching CNBC and Jersey Whore you smartass.
/s
It's Different This Time!! What is ya ign'ant?
THANK YOU - because that just gave me a funny thought ...
"BREAKING: THE BDI HAS TURNED NEGATIVE, SHIPS BEING LOADED AT THE US FROM GOODS REPO'd FROM AMERICAN CITIZENS AND SHIPPED BACK TO CHINA"
(that's right)
(a negative bdi - means we have to give back all our HD tvs and smart phones)
Exactly!
You forgot one thing though - the NEGATIVE taxes (to be paid by .GOV)
Looney
Can we also give them back all the tainted food shipped to us? (Though how much you want to bet that somewhere along the way of ownership, it's the same companies making stuff over here?)
This year, I am supporting M2. Save, save, save.
The best we should be hoping for is a soft landing but the Fed and their 4 horsemen are intent on propping up the markets like that alone will keep people going to restaurants. Should be allowing 2016 to be a nice slow 15% decline or risk a discontinuity in the markets one day where it takes 25-30% in a week.
Cant we just CTRL P BDI?
Let's change the name to Bourbon Dry Index. We need more drinking.
BBBDIs: Booze, babes, bullets dry index.
(Cept Booze is wet, and babes too if it is done right.)
NFL playoffs! Wooooooooooooo!!!!!
"Baltic what? Honey, take care of that crying kid. I'm playing with my gun. No, not the one attached to me - it quit working without a pill a long, LONG time ago. And I can't even find it anyway." - Average Idiot American
2008 all over again! The corrupt bailed out, the moral lashed with a cat o' nine tails!
They can bail out a business, but they can't fix broken world demand. These ships will dry dock and rot somewhere. We won't see an increase in demand anytime within the next decade unless there is a war, in which case they may rot at the bottom of the ocean. A bail out is a bandaid for a decapitated limb.
Naw, here is the fix:
Load up all those empty ships with Syrian refugees and ship their ass to the Port of Los Angeles:America's Port (TM)
https://www.portoflosangeles.org/
Should we lower rates?
How were they bullish in the first place? I mean, that is absurd. Dry is basically Coal and Iron Ore, basically China GDP. They are complete hacks.
lets not forget that oil tankers are not used for shipping but storage.
Meh...Ma Cheefs is in da playoffs and dees teknical mezurments means nuffin no mo.
NACHOS!
I bet one could make a killing scooping up one of these excess cargo ships at a bargain basement price and using it to shuttle refugees around.
Hell just one load would be enough to retire on. Good thought. A cruise ship without windows.
Broke back markets brought to you by your Fed!
the destroyer of the American E-con-o-me since December 23, 1913
We'll keep doing what we do: mispricing assets and risk, distorting the investing landscape, mis-allocating resources to unproductive uses, incentivizing overleverage and excessive risk taking, rewarding abhorrent greed, and punishing savers -- all in the name of helping you, Main Street. We mean, the "main" street, Wall Street.
As long as we have a job and prices go lower I'm pretty happy.
Are "we" two people? What prices are going lower? Insurance of all sorts? no Food of all sorts? no Medicine of all sorts? no Utilities of all sorts? no Taxes of all sorts? no Gasoline? Well that savings of $20 per week sure offsets - Not!
It's funny, gold, silver, oil, potash, corn, wheat, iphones, nat gas, platinum, palladium, rare earths, copper, aluminum, zinc, China real estate, all are going lower. Yet we feel like prices are going up. I think it's the government's fault as they tax too much.
PEs who played the "recovery" theme (when there is none) using their "dry powder" to play the structured finance shipping game in 2013 are truly and entirely screwed. They thought they would make a quick buck, now they are stuck with the "sinking" ships...Good luck...
I just hope it makes a great big farting sound when the whole thing collapses.
Long slave labor in Bangeladesh ship breaking yards
Is it too early to take another Codine pill? Reality means nothing in this market.
The worldwide collapse continues with propped up indicies. The Great Reset commith.
Cash for clunkers matey. Scuttle 'em and create an Island. Then invite all those mormon cowboys down there to form a new country --- El Libertard!
A shipping broker made me fall off my chair the other night when he told me that he closed a deal for transporting iron ore from Western Ausralia to China for $2.90 a tonne.
We are all Lieutenant Dan now!
In a world where it is cheaper to harvest a log in North America, load it onto a truck and drive it to a port, put it on a ship and sail it to China, put it on a barge up the Yangtze River, then onto a truck to drive it to a factory. Then reduce it to clothes pins, pack them in boxes, put them on trucks, truck them down to a barge on the Yangtze, sail it down to a main port. Load the boexes into containers, load containers onto a ship, sail to Long Beach and unload the containers. Take out the boxes load them on trucks, drive them to the town where the logger who cut the tree needs to hang his laundry out. He goes into WalMart and buys it an an everyday low price. As long as that is cheapest, fastest, most profitable, they will keep doing it.
As a 40 year veteran logistics specialist, I salute Jack Burton's pointed & poignant summation.
And, yes, “They will keep doing it.”
Nice comment, Jack. Ya know I lived in Michigan in the heyday of the big car manufacturers there. We tend to denigrate "line" work because we've become too sophisticated a country for that kind of plebian job, or so were told (jobs Americans won't do). But the guys I knew who worked those lines were incredibly proud of being part of the great American car creation companies. They had a sense of pride in their work and in what they created. People need that to hold their heads up.
So, the previous mantra that proposed the BDI rates were lowering due to newer and more efficient ships being brought online no longer plays out?
With the price collapse in bulk commodities also making headlines, it sure is getting harder to hide the fact that globally, production has really hit the wall.
Looking at the chart, ISM Manufacturing Imports were always in recession before hitting the lows seen today. Conclusion....we've been in recession, are in recession and the slack jaw manipulators are not allowing anyone or anything to admit it.
OK, so have a chuckle, but I have never become comfortable with the "chinese" prices of things. Sometimes I tell my kids that it baffles me to pay the same prices for thing (that were available) now that I saw my mother pay when I was a kid. We are a resilent people and we'll find a way to crank this one over and gear up manufacturing in this country. My kids are workers because that's what they've seen from me, so no worries there. The worry is the generational welfare families who have no clue how to do anything, even simple things like cooking from scratch or using a sewing machine.
And regarding those guns Obomao wants to take, he can kiss the grits of this country. The guy is such a liberal twit that he has no clue, no idea. They'd have to come up with a new word because "revolution" would be way too mild.