World's Biggest Containership "Hard Aground" As Baltic Dry Crashes Below 300 For First Time Ever

Tyler Durden's picture

Before this year the lowest level The Baltic Dry Index had reached was 556 in August of 1986 and the highest was in June 2008 at a stunning 11,612. Today saw the freight index hit a new milestone however, crashing through the 300 barrier for the first time ever - at 298, this is almost 50% below the previous record low.

 

Commodities obviously are saying something very different from "the market"...

And as Dana Lyons notes, of course much of the input into the BDI comes from the price of raw materials. Considering the deflationary spiral in commodities, the drop in the BDI to all-time lows shouldn’t be a shock.

However, the depths that the index is now plumbing is quite alarming and suggests trouble in the global trade picture.

 

It would also suggest perhaps that the deflationary pressure is not just a supply issue. Consider every prior drop in the Baltic Dry Index down to the 500-600 level. Each time, the index immediately jumped as if latent demand was just waiting for those lower prices. That development has not yet occurred this time around, even as prices are reaching 45% below the previous record low.

 

The Baltic Dry Index has become a trendy thing to mention in recent years when discussing global market and economic conditions. The truth is, nobody really ever knows for sure what the broader message is behind the index’s behavior. That said, this recent plunge is making it quite difficult to conceive that it means anything positive in terms of the global economy and deflationary pressures.

And finally it's not just commodities and the Baltic Dry that stalled, as gCaptain reports, one of the world’s biggest containerships is hard aground in Germany’s Elbe River leading to the port of Hamburg.

The vessel CSCL Indian Ocean ran aground Wednesday night following an apparent mechanical failure.

An attempt to refloat the ship at around noon local time was unsuccessful.

 

Germany’s Central Command for Maritime Emergencies (CCME) says it has been in touch with the ship owner and they are in the process of developing a salvage plan. A second attempt to refloat the ship is expected during high tide Thursday night.

 

An overflight of the area Thursday showed no signs of pollution. There were no injuries reported.

 

The Hong Kong-flagged ultra large container vessel (ULCV) CSCL Indian Ocean measures 399.6 meters long by 58.6 meters wide. The vessel belongs to China Shipping Container Lines, part of China Shipping Group. It is one of 5 CSCL ships with the capacity to carry a staggering 19,100 twenty foot containers.

 

The incident has caused minor impacts to ship traffic on the Elbe River.

 

CSCL Indian Ocean is part of a new breed of giant containerships designed to carry more than 18,000 TEUs and used to transport goods from Asia to northern Europe.

*  *  *

Quite an anology!!

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WTFRLY's picture

As Ron Paul would say, it's happening...

Father Thyme's picture

Obummer saved the world from rising sea levels. And then this happened.

erkme73's picture

Not dissing the fear-pron... I like that too.  But could the drop in the BDI be an over abundance of new ships?  This article states as much:

 

CSCL Indian Ocean is part of a new breed of giant containerships designed to carry more than 18,000 TEUs and used to transport goods from Asia to northern Europe.

I mean, with more ships coming on line, doesn't that dilute the rates?


JamesBond's picture

Age old commerce tactic.  If you can't make money off consumers, run an insurance scam.  I can hear the captain now -

"Don't give me that 'Act of God' shit"

 

 

jb

greenskeeper carl's picture

They'll have ot get a lot deeper water than that. Even if that thing "sank" in that river, there is probably less than 10 feet under the keel in the middle of the channel, it won't go far. It would be fun watching them try to drag that thing out of the mud. Ive always wanted to see/hear an big 8 in hawser snap, or one of the wire ropes large tugs use snap. From a good distance, of course, those things will fuck you up, cut you in half. The longer that ship sits there, the harder it will be though. I river like that has a bottom thats all mud and settiment on the bottom, it creates suction on the boat and holds it there, making it harder to unground it.

j0nx's picture

I'm sure somewhere in that jumble of bad grammar that there is a point to your thought but I have yet to decipher it.

PeeramidIdeologies's picture

I bet your mom held your hand a lot as a child. The man knows exactly what he is talking about.

I need more asshats's picture

The legend lives on from the Chippewa on down
Of the big lake they called 'gitche gumee'
The lake, it is said, never gives up her dead
And the joo's used it as a toilet.

Along came a ship and the joo's wanted to CON-trol it
it was named the CSCL.

They hack her helm and ran her aground and the insurance it paid times the hundred.

Soul Glow's picture

Maybe if we put a 40% tax on shipping all our problems would be solved.

scintillator9's picture

Much like the proposed $10 per barrel tax on oil....

http://www.bloomberg.com/politics/articles/2016-02-04/obama-to-request-1...

President Barack Obama will propose a $10 per barrel tax on oil in his fiscal 2017 budget plan, an idea that received a chilly reception in the Republican-controlled Congress that oversees spending.

GWinColby@ks's picture

With the economy now doing so well, it would be an excellent time to impose another tax....and along comes The Burn.... Just sayin'.

Pairadimes's picture

Running those things aground might be good strategy right now.

 

CheapBastard's picture

The next best thing is an unlucky strike by 'Jewish Lightning' ... followed by a rather large insurance claim.

813kml's picture

Good thing it didn't run aground in SF Bay or else they'd have hipsters squatting in every container within days.

Abbie Normal's picture

and if the containers are full of iphones, they're already considered as sold.

PeeramidIdeologies's picture

Moral of the story people shit where they drink.

iggenFlot's picture

It's one big Jewish conspiracy, isn't it?

stormsailor's picture

plus one for the edmund fitzgerald, and another for gordon lightfoot

Vendetta's picture

My brother had 2 friends who were on the Edmund Fitzgerald when it sank... I had seen the ship several times.

Pickleton's picture

" I river like that "

 

I bet your mom made you spit out lots of lead paint chips as a child.  At best the man described wire ropes breaking being bad and, at best, still babbled a bunch of nonsense.  

Casey Jones's picture

j0nx
If you're going to bitch about bad grammar at least manage to keep more bad grammar out of your own post! Frankly, dude was spot on about his analysis, grammar be damned. That thing ain't going anywhere at least until they offload all those containers.

RafterManFMJ's picture

These flip phonnes are hard s to use, yselcy when I'm driving!

Freddie's picture

Indeed.  The analysis was excellent.  Those tugs can push and pull but that big ship is stuck hard.

Nice to see "free trade" that has wrecked Europe like the USA.  Tens of thousands of cotainers filled with shit from china while the illegals from the middle east and africa invade europe.

If any Germans speak up - they can go to jail.  Police state.

Jim in MN's picture

You need to watch Groundhog Day many, many more times before you can competently judge the wisdom of messing with greenskeeper carl.  Grammar is really going to be the least of the issues.

Abbie Normal's picture

or maybe just watch Caddyshack once....

TheReplacement's picture

Most hard aground since Lehman.

TheReplacement's picture

Most hard aground since Lehman.

JoeSoMD's picture

If they can't refloat on the next high tide they will bring in some crane barges and offload a bunch of the containers.  It will be slow and expensive but there should be no show stoppers to eventually getting her refloated.

GotGalt's picture

Tinky - I would not be so quick to say NO to over supply.  There has been a massive glut of new builds over the last few years and literally hundreds more scheduled for delivery this year and next year.  All these new builds while the existing supply/demand curve is so twisted.  Sure demand has waned considerably, but the supply situation has also played into this.

runningman18's picture

No, the "too many ships" propaganda has been debunked.  Companies like Maersk Line have already admitted to the public that crashing demand is the biggest problem, not too many ships.  Also, shipping companies scrap old ships to make way for new ships.  They don't saturate their own market and sabotage their own rates.  That would be fucking retarded.

noone5's picture

Um, that's exactly what they did. Capacity has been outgrowing global growth and now they've oversupplied the market.

You're just spinning it as demand is the problem. You're pretty much saying oil's problem is that we aren't using enough, even though we're using more than last year. Just because demand can't meet supply, doesn't mean it's a demand problem.

runningman18's picture

You don't seem to understand what comes first in this process, guy.  The lack of demand came first, then the overcapacity, not the other way around.  I'm not "spinning" it that way, that is HOW IT IS according to the shipping companies themselves not to mention the fucking math.  Oil usage is down to 1997 levels; that is not just some blip in energy demand.  If demand is not the issue then why the hell are so many major oil consuming nations running out of storage space for oil shipments?  This was not as big a problem last year, now it is.  Hmm, I wonder if falling demand might be the primary contributing factor..? 

As far as the ships go, I'll say it again - shipping companies scrap old ships (to sell parts and materials) to make way for new ships.  They do not saturate their own market and reduce their own rates down to half of the previous historical low.  Demand is the problem.  Accept it and get over it.

noone5's picture

That doesn't make any sense because it's not demands responsibility to meet supply. Supply in this case is reaction to demand, not the other way around. Producers don't say "oh look, a bunch of shipping capacity, we better figure out how to fill them up." Companies have no control over demand, only supply. It's their job to accurately model and plan for demand. If you have a massive surplus or shortage of ships, that is a supply miscalculation on the supply side.

Oil usage is not down to 1997 levels LOL. In fact it's not down at all even. Suply is outgrowing demand. Again, that's not demand's problem. It's not the world's job to meet supply, it's the producers' job to meet demand -- and not to under or oversupply. If your business model can't accommodate changes in demand, then you fucked up

Let me ask you something, if oil consumption and supply is 8/9 one year, and then 8.5/15 the next, does that say anything at all about demand? No. That's why oil consuming nations are running out of storage space for oil. They are supplying millions of barrels per day more than they were last year. Oil consumption isn't down, it's that the market can supply as much as it wants. SA could supply even more if they wanted to. They are crushing shale driller by oversupplying in hopes of putting them all out of business.

Yes, companies scrap old ships and they have and they will continue to. The problem is two fold. They can't build ships as fast as they can scrap them, so if they scrap a shit load and demand picks up again, then they're screwed, not to mention how capital intensive it is. Secondly, they will have to scrap ships that aren't actually too old. They have been growning their fleet at too quick of a rate and now they have a younger fleet than ever, and naturally newer ships are better and last long than old ones. That's how technology works.

Supply is the problem. Accept it and get over it.

 

runningman18's picture

Wrong again, guy.  OIL CONSUMPTION IS BELOW LEVELS SEEN IN 1997:

http://www.weforum.org/agenda/2015/07/the-surprising-decline-in-us-petro...

I never said it was "demand's" responsibility to meet supply.  I said that demand is the primary driver of the rate decline, not over-supply of ships, which is a bullshit attempt to misdirect people from the fact that demand is declining in every fucking economic sector, including energy usage as I have just shown.  Is this too complicated for you?  You are still mesmerized by the "too many ships" lie.

For your question to be valid, you would have to show that oil production has vastly increased over previous years in order to account for the lack of storage space, at least, if you still assert that demand has not fallen.  Oil production has remained steady and even fallen slightly in some sectors, so the numbers do not back your naive claims:

http://oilprice.com/Latest-Energy-News/World-News/World-Oil-Production-S...

Again, companies do not deliberately sabotage their own rates.  You are a fucking idiot for asserting that they do.  Demand, as Maersk has publicly admitted, is the issue, not the supply of ships.  You are welcome to entertain whatever fantasies you like, but the facts are the facts.

Al Tinfoil's picture

Um, BDI means "Baltic DRY Index".  BDI is an index for ships that carry BULK loads of dry materials like iron ore, coal, grains, etc.  NOT CONTAINERS. 

CSCL Indian Ocean is a CONTAINER CARRIER.

That said, there has been a surge of shipbuilding in the last few decades, and oversupply is apparent in both bulk carriers and container carriers.  Hubris and over-optimism strike again.  Shipyards in Korea and China are reporting cancelled or delayed orders, layoffs and empty ways.  Some bulk commodity fleet owners are reported to have idled their fleets since offered charter rates are so low that vessels would operate at a loss that exceeds the cost of keeping a ship idled.  Maersk, the largest container carrier fleet owner/operator, went on a building binge of over-18,000 TEUs in the last few years, but in December 2015 was reported to have cancelled or delayed some orders for new container vessels, and was cancelling some of their regularly scheduled voyages due to falling demand for container carriage.

The main culprit in the fall of the BDI appears to be a fall in demand for basic commodities reflecting a fall in world economic activity.  

On the other hand, there has been a recent shortage of oil tankers (now ending/ended) since they were being used for crude oil storage by contango speculators. Tanker charter rates peaked recently and now appear to be dumping.  

As to the cause of movements in the BDI, see https://people.hofstra.edu/geotrans/eng/ch7en/conc7en/bdi.html

HenryHall's picture

Container rates way down:- few companies are buying anything.

Dry bulk cargo rates way down:-  few companies are making anything.

Captain Chlamydia's picture

Mayday this is super tanker running aground! 

-Zis is ze German coastguard! What is ze problem? 

We are sinking! 

- What are you zinking about? 

iggenFlot's picture

Zero Hedgers only want to talk about reduced demand, not increased supply of container ships.

Why? Because by pointing out that there are near record numbers of new vessels, you undermine the Zero Hedge "The Sky is Falling!" meme.

Stop pointing out truths like that and you'll get along fine with the Zeroes.

Savyindallas's picture

Life is so simple and blissful for simpletons like you. Don't worry-be happy. In a way I envy you  -just like I envy the life my dog is living  -eats well, sleeps well, has plenty of love and attention. Living the dream. 

runningman18's picture

The oversupply of ships claim was debunked months ago after shipping companies admitted that demand is the problem.  Sorry to burst your bubble...