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Shipping Rates Go... Negative
Following the endless collapse in the Baltic Dry, it was only a matter of time before the shipping industry one-upped the Chairsatan, and was the first to introduce, dum dum dum, negative rates. That's right: you are now paid to hire a ship. Via Bloomberg:
- GLENCORE HIRES SHIP AT MINUS $2,000 A DAY, GMI SAYS
- GMI TO CONTRIBUTE $2,000 A DAY TO GLENCORE'S FUEL COSTS
- GLOBAL MARITIME'S U.K. MD STEVE RODLEY CONFIRMS DEAL BY PHONE
Why is this happening? Perhaps because ships have to be kept seaworthy and in motion or else they become scrappage in as little time as 3 months. Think sharks. Needless to say, this will play havoc with shipping company (and affiliated entities') liquidity, as the biggest default wave in the history of the industry is about to be unleashed and tens if not hundreds of billions of European secured loans are about to be "impaired."
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Upside down world we live in.
They lose money on every trip, but they make it up on volume.
They are burning dollar bills below deck to make steam to power the ship
You mean above deck of course.
Must get missing $ palets home?
This is just a preview for rest of the private sector. Debt-default bitchez!!
Ships will be bought on the cheap just before being called back into action transporting vast amounts of war supplies for the next big one. Lets keep an eye on buyers.
I just got an email.. It was spam.. With shipping rates.. One of the rates was as low as $50 from West Coast U.S. to China. Other routs (U.S. to Europe) and (China to U.S. or Europe) were about half the price as a few years ago.. These are 20' and 40' containers..
time to start renting those containers out for people to live in. It'll be like Alaska where the residents get a rebate from the operation as the ship drives around aimlessly.
Let's start up our own cruise line!
Take a long peaceful cruise with Metal Box Cruise Lines! We pay you!
Let us partake of the fruits of grevious malinvestment.
BDI now down to 647. -62.77% YTD.
http://www.bloomberg.com/quote/BDIY:IND
time to start renting those containers out for people to live in
You laugh, but just last week there was an architectural show in Canada demonstrating dozens of designs for converting 20 and 40 foot containers into living spaces. a 40' container g ives 320 sqft of living space. A 530 sqft bachelor in downtown Vancouver goes for just under $400k CAD these days. Two 40's cost approx $10k used, which leaves $390k to buy/rent a lot, and trick the containers out.
From China to the US it is usually around 50 a cubic meter. If it has to go on rail to the east coast (fromt he wwest coast) you are looking at about $80 a cubic meter. These have been the rates for the last couple of years (+ or - 5%).
What is really fucking sad is that it takes less time to get a container from China to California than it does from California to NY. Go figure.
All the bond warehouses I have been in are full. Shit piled to the ceiling waiting for customs clearance. So I haven't noticed a slowdown. Maybe it's worse in Europe?
You got to remember that the Chinese (whole fucking country) just took off about 3 weeks so absolutly nothing was shipping. Those fuckers get more vacation than US workers. Pretty soon they will be getting as much as the Greeks.
Anyway, Peak Oil will even it all out eventually. Just a waiting game.
Spot on! Why bought? They will be declared, er, temporarily possessed by the state in the interest of Oligarch Death grip perpetuation.
But man oh man..... what is coming is going to be awful. Truly a blood bath. BDI was the canary in th ecoal-mine in 2008. Patient died in September.
Now, can't even keep the facade alive..... this is really the signal for the end of the stox market being weeks away.... money market, inter-bank, short-term, long-term.... all freeze like Europe is right now. it all looks related. Biggest snowstorm EVER recorded in Rome/Vatican yesterday.
As I used to say back in the day....trip outtttttt maaaan.....
ori
/san-onofre-33rd-parallel-4th-7th-feb-window-out-on-a-limb/
I think I will hire a ship
And take an around-the-world trip
With negative rates
Which quickly inflates
I'll be rich once I'm back at the slip
Keep in mind, just because the rates went negative, the customer still must pay for fuel. So if a bunch of ships need to relocate to a busier region, it's cheaper for a shipping company to lose money on the rates, but charge for fuel, than to just run the vessel empty to another location. It's actually pretty damn smart - imagine a taxi driver that needs to get from Kentucky to Las Vegas (because it happens to be busier in LV) and finds a customer willing to pay for fuel expenses, but not for the ride itself. Win, Win.
Shipping rates are actually about to reverse, because three dozen over-aged vessels are going to be sold to the scrap yards this year.
By the way, negative rates on dry bulk have been charged since mid January, while cargo(container ships) rates have more than doubled in the past year.
Max Fischer, Civis Mundi
I've been wondering about that. My container rates are not heading in this direction at all. Is it possible to convert a dry bulk to a container? Cheaper to just buy new?
Conversion would be technically very difficult due to design and layout.
the plausible consequence of the currency war is a total decrease in trade, not a shift of trade.
then again, they could be reconfiguring routes to support NATO logistics, which are probably 3x as lucrative.
There once was a tanker from Maine
That was filled with high pressure propane
One day skipper Drew
Lit a cig and it blew
And the captain said "do it again"
ORI, your post caught my eye. As I am in the learning curve I am trying to understand the BDI a little more. Can you explain further about the BDI ?
vc, best take it from the experts, ne?
<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<,
Baltic Dry isn't a Latvian deodorant or an Estonian cocktail. Rather, it's a number issued daily by the London-based Baltic Exchange, which traces its roots to the Virginia and Baltick coffeehouse in London's financial district in 1744.
Every working day, the Baltic canvasses brokers around the world and asks how much it would cost to book various cargoes of raw materials on various routes—150,000 tons of iron ore going from Australia to China or 150,000 tons of coal from South Africa to Taiwan. Brokers are also asked to consider variables such as the type and speed of the ship and the length of the voyage.
The answers are melded into the BDI, which appears in shipping publications such as Lloyd's Listand on the screens of information vendors such as Reuters and Bloomberg. Because it provides "an assessment of the price of moving the major raw materials by sea," as the Baltic puts it, it provides both a rare window into the highly opaque and diffuse shipping market and an accurate barometer of the volume of global trade."
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Basically it is the one incorruptible indicator of global trade health. If lots of thing need moving around, BDI goes up, if no one is buying and nothing is moving, BDI goes down. It si a vast and largely independent market (some collusion of course, but not on a day to day basis perhaps).
Just Google BDI in April through Spetember in 2008. it fell massive amount, much greater in percentage terms back then because it was coming off a Boom driven high, but it told the tale of what was coming in September, topping out in June/July if I remember correctly.
Because ultimately, even vapour money has to move based on some "trade" occuring somewhere, howsoever re-re-re-hypothecated it might be and so ultimately, BDI crash = Crash, all around.
Not good.
ori
Thanks ORI :) This would include China products sitting in the dollar stores etc.? As there appears to be manipulation of job numbers ...cue "Happy Days are here again.....there isn't supporting figures in the BDI. And once again there is bank exposure ...once again the canary in the coal mine...
Sure ValleyC. I was a valleyB myself in the boom days.
And yes, where the rubber meets the road is Leters of Credit for shipments to leave port.
When they dry up due to market risk.... double whammy.... really went downhill in mid-08, this is a repeat, only much more severe.
ori
ORI aka valleyB :) ... valley chick for valley chickens...lol...my eyes were opened Nov 2010, and had paid someone to do all the investing...that was until 3-11...got out all together and follow this site daily and trying to learn the financial part...bad timing for that since now what is bad is good and good is bad...buy the news and sell the rumors. Yup...use to be a sheeple...kind of miss that world.... ;-)
I know eh ValleyC? It was a warm and comfortable world. Vacant stares, vacant minds but boy it was FUN! Skiing in Tahoe, Tennis in South Carolina.....hmmmmm
I don't miss them though! :-)
ori
Not neccessarily true in the short term. Sometimes a lot of capacity comes online and there is enough of a volume increase to match so you get rate reductions. As older ships cycle out and market grows rates recover. It's a volatile measure because of the long cycle to build ships. Most coming online this year were ordered in 2008 when they thought the party would last forever. Now they have only 2-5% demand increases and 22% increases in capacity. not a volume collapse.
Naw, just buying Iranian oil cheap, arbing differences between Brent Iranian sweet and selling CDO's.
Make sense?
No, they loose money on every trip, but it is LESS than if they sit around. I worked on a ship once. Many of the sailors have contracts for 9 months on (every day) and 3 off. There are a lot of fixed fees on the industry. Ships need to be working 24/7 to make a profit. They are also in constant state of decay and need endless maintenance.
*whoosh*
Working on ship = scrapping and painting.
merchant marines spend more time chipping than doing anything else
Welcome to City 17.
Shipowners are "underwater".
Geez, will it be the floating boats that finally sink Euro banks?
This is bullshi- I mean bullish
Bullish for more people eating iPads
Free shitt- I mean shipping
Gilligan!! What have you done now little buddy???
Or perhaps the "just in time delivery" world.
Upside down world we live in.
Here's visual proof of that......
http://www.youtube.com/watch?v=9La6AXq8yXY&feature=related
Quote from Armada Markets facebook entry: "Question, over the last 5 years if you take all asset classes in the world, then in agregate, how much has their value fallen in trillions? Global central banks have printed probably close to 3-4 trillion dollars. We believe that's less than the agregate fall in value of all assets. Therefore, even by printing these couple of trillions they have not been able to cover all the buying power that has been lost over the last years.
Also, high inflation can never emerge if the underlying global economies have enormous overcapacity - for example, take a look at capacity utilization rates in G7 countries. Therefore, further appreciation of commodities prices should be limited."
I guess when the s.it hits the fan, and there's going to a war with Iran, then most likely we will see all those papergold holders sell their stuff (paper gold-silver will thus collapse) to repatriate and the value of physical will go through the roof. The end is near, but after the end, there will be a new beginning. :)
Hahaha!
Let's pay someone to fix all of those broken windows we just broke.
i was going to post the very same thing!
how long do they think they can sustain this travesty?
If we close our eyes and pretend it isn't happening, forever!
"I think we're gonna need a smaller boat"
It's the new and improved submarine rates.
The trouble with my boat is when I'm standing underneath with a paint roller its bloody huge, when it goes back in the oggin it shrinks.....
Let's make the taxpayers pay someone to fix all of those broken windows we just broke.
There ya go - fixed it.
We need to print the money first.
We're gonna need a lot more windows broke...
Are negative rates deflationary, hyperinflationary or imaginary...it is getting so difficult to make sense of anything having to do with "money" in todays world and global marketplace!
Just spoke to Steve Rodley (MD of the company), Glencore is paying for the fuel and the shipment moves the ship to the Atlantic where there is stronger demand.
Basically the shipping rate excludes fuel.
Alright, I'll comment first. Can someone please explain this to an average, ignorant noob? (me)
It's like you had to pay your boss to be allowed to come and work for him and make him money and survival be damned. Ever heard of that donkey that learned how live on zero hay but the poor beast died cause he was laying on the ground sleeping and truck driver mistook him for a rug?
Basically demand is so far in the shithouse that ships have very little business to haul. Because ships need to be moving pretty much nonstop to avoid corrosion and such, that they're are now paying you to haul product for you.
Breaking the biggest (read most expensive) union in the world.
Merchant Mariners.
Next time you rent a beach house, notice what the salt air does to the hinges on the shutters.
Salt water is the real reason most people don't own a yacht. You might swing the purchase price, but it's the maintenance that's the real cost.
saltwater, and the fact that they haven't two nickles to rub together
That doesn't stop people from buying things... it's the availability of credit that's the deciding factor. ;)
keep your nickles they're actually worth 5c
It means ships are charging customers less to transport a shipment than it costs, so they're losing money on the shipment.
But it's better than no customers and no money coming in. It's better to lose $1,000 a day than lose $10,000 a day.
It's like having a seasonal business, installing windows in homes for example, and doing window jobs at a loss during the slow season to keep your employees working. Many seasonal construction businesses do this.
But shipping isn't seasonal, which means this is a longer term problem, and ship owners may not have financial reserves to weather it, hence the risk of bankruptcy and default on billions of dollars of loans from banks.
Sharks!!! Now you did it Tyler :D:D:D:D:D:D:D:D:D:D:D:D:D:D:D
frickin laser beam sharks
The economy has gone full retard.
Umm where have you been?
Yep, the economy has been in retard mode for some time now.
"It's the Economy Stupid"
"It's the Stupid Economy."
Every since I heard ZH say it about the EFSF I thought it was a fun descriptor too...Full Retard..yup...spot on.
The only thing keeping it together is faith... faith in so many different things... which collectively becomes some sort of normalcy bias. Each absurdity can be compartmentalized as some sort of outlier and mentally dismissed. The system adapts slightly and consumes the absurdities to the point where we are somehow conditioned to believe that this will continue... and maybe it will... until it doesn't... then look out below. I can't believe we've survived this long.
Well said, amigo, well said.
PaperBear
"It's not dark yet, but it's gettin' there" Dylan
You never go full retard.
You clearly have never metZeroHedge's own RobotRetard, er, RobotTarder, um, I mean RobotTrader.
I got better idea Mr Lennon - let somebody to pay You to make him broke ...
just like politicians
Default 'wave'...ha ha
Incredible.
This is bullish for Greece. sarc
So why are the shipping stocks trading up?
Because down is up and up is down in this crazy market.
just like ben said, no inflation, now he can print....he was going to anyways...
Baltic Dry don't lie!
Oversupply of ships? Fixed.
For christsake people, pull your head out. They can make up for this on volume.
Yeah! Just have them go from port to port not delivering anything forever!
Forever!!!
Do they get some sort of "liquidity credits" from a regulatory body, just for making the trip?
kick the ship
Holy Ship!
Ship of fools...
Not just shipping either
http://globaleconomicanalysis.blogspot.com/2012/02/huge-plunge-in-petroleum-and-gasoline.html
Average minds think alike! I posted that data here last week.
I believe it, but what I want to know is, why is gasoline at the pump so damned expensive right now, then? Just Fed inflationary policy? People are trying to use as little fuel as possible because it is a giant black hole in their monthly budgets--no unnecessary trips, and when running errands, make multiple stops while you're out. Obviously, this is what people should have done in the first place, but Americans are a completely wasteful society.
I also think fewer commutes and more retirees factor in.
I am setting up a new business.... hiring ships... I will make a fortune
Make it a cruise line, profits all around
Now that's exciting stuff right there.
maybe soon the chairsatan will pay me to buy stocks?
I'd like to quote Joe O'Biden here by saying:
"This is a big fucking deal"
Someone who knows about the shipping business must lurk here on ZH. Let us know if this is worth pissing about.
i want to hire uss enterprise. how much they are ready to pay me?
Food prices keep increasing. Know so many people which are buying off-brands to save money.
Bernanke and the Federal Reserve banksters keep thinking their inflation game will work.
Their just crushing demand and savings. Global wage arbitration will maintain or lower wages.
GR8! Now it won't cost me anything to haul my ass and stash outta dodge!
The BDI is up for the first time since Dec. 12, Greece will be okay in hours, Bernanke will flip the switch to positive growth in 15 minutes.
Nothing to see here. The emperor is not naked he's just wearing a new Cloak of Cloaking made possible by future technology because the future has already been won.
Apt user name, given that the future you wished for has arrived already.
http://www.guardian.co.uk/science/2011/feb/01/scientists-invent-invisibi...
Yes I know of this cloak it will be first given to all the kleptocrats that will escape the gulag before the proletariat know they've fled.
SubPrime Ships
And soon in the good old USA you will have to pay banks to hold your money for you, in your own savings account. Friggin Awesome.
with all the hidden fees and fine print, i think most already do
Wells Fargo started that model in the late '80s. You must have missed that memo.
I had a small savings account that I was just keeping open with a few bucks for spite vaporize that way. There - that'll teach you.
LOL! about those supply lines...
hedge accordingly.
Speaking of negative, you are sooooo negative. Haven't you heard, Europe is fixed ;)
Would it be possible to get a source for that headline?
http://www.bloomberg.com/news/2012-02-06/glencore-hires-grain-carrier-at-minus-2-000-a-day-global-marine-says.html
Gray day here on the coast. Two meter high waves rolling in at 17 second intervals. The noise is such that my mind has organized the sound of the sea as a short piece of music that just runs over and over like the waves rolling in---I don't know what to do with myself today---go for a walk, talk to the pelicans,or what?
I had hoped that there might be a real even somewhere in the world that someone was reporting on; but aside from being paid two grand to hire a ship----there is nothing but the sdame old opinions regarding the past and the future.
I guess nothing is happening, so being a 'do-nothing dude', i'll just just do nothing again today.
Ah, such is this life we live om
When you're old an "event" is making it out of the shower without breaking your hip...or going to the bathroom regularly.
I hear that eating fiat keeps you regular. iPads not so much!
mani padme
"Slow boat to China" takes on a new meaning.
Aint nothin gonna break Bernak's stride, ain't nothin gonna slow him down, oh no, bonds got to keep on selling.
http://www.youtube.com/watch?v=TY41o-iZStI
anyone got a good breakdown of which banks have large credit exposure to shipping?
Look to Greece.
well ,yes of course, traditionally. There sure are other european banks exposed as well, some late joiners to the BDI bubble maybe?
and on this news shipping companies are up of course, dryships leading the way up over 6%, granted it is for signing a rig contract
Crucible - you're right. Ships are like women, it's not the initial cost that will break you, but the upkeep ;)
When the Ship goes downnnnnnnnnnnnnnnnnn you better be ready!
WHEN THE Ship GOES DOWN!
scratch .. scratch ...
dOWN DA DA DOWN, DA DA! DA DA DA DA DOWN DOWN
Down dow down down
Down down down down
Here's the Remixxxxxxxxxxxxx
Greece should just tow its debt out to sea. Problem solved.
To the "Love Boat" Theme:
Debt...
We owe it to you...
CDS...is worthless true....
And Debt...
We won't pay anymore...
Let it go...
ECB is so damned screwed...
The Debt Boat
Soon we'll be making another run
The Debt Boat
Promising something for everyone
They don't have enough ships to haul all that debt.
BDI schmiDI. 9 am Bernake starts buying Euros hand over fist. Up 50 pips in 50 mins.
It appears that the ship is hitting the fan.
I don't believe that you can be paid (in nett terms) to hire a ship. It that were true they could save $2000 per day by just running the ship up & down the coast, empty.
Ships don't just crumble away either - true, there may be maintenance and/or re-commissioning costs for idle periods, but ships standing idle is alot less arduous for their structure/mechanics
ploughing through oceans & running those servicing costs.
The simple headline 'paid to hire a ship' is ludicrously wrong.
True, nobody is paid to hire a ship. Customer still pays, just not enough for shipowner to make a profit or break even. Losing $1,000 a day is better than losing $10,000 a day.
Well that I can believe - just assembling & re-hiring a crew for example, can't be an insignificant cost, so just running the ship with a minor loss is still probably, nett, cheaper than an empty cold one.
I just wish some of these 'submitted by' posts were a bit more rigourous in the logic stakes.
was there too much over build or was it a big drop in trade world wide..ans yes and yes.
BLS: there is a big increase in shipping with a seasonal adjustment and birth death model that one in three ships have left the planet taken by space invaders..empty cargo holds are not empty they are full of air!!
It's all coming together now. Ben is trying to fight the deflationary forces in the shipping business. And we all thought he was looking out for the banks.
real world and ponzi world, two worlds but one money line; if the inverted pyramid falls it'll hurt a lot but at least we'll be back to normality. Right now the norm is abnormal in all, even that it doesn't fall; it defies commercial gravity through irrational exuberance pumped levitation. The BDI is commercial gravity in motion...down a slippery slope it can only pick up in momentum. Now you tell me how it will end : in Olé! As the matador avoids crazy bull or in aieee, aieee, aieee; cornada time?
When I started in waste recycling business in 1994, all german municipal waste was shipped by municipalities, via clever middle men, to third world countries at negative rates; they didn't have a recycling system in place in Deutschland or for that matter in Europe. It went to Somalia, Philippines and Albania etc. And the going price delivered was 1000 Euro negative per ton! By loads of 5000 tons a shipment. They sold hundred of thousands of tons on that basis, as the EEC laws were in place, forbidding local dumping in Euroland and conditioning the prices that were paid to get rid of it abroad. Huge scam!
DO the calcs, a lot of jerks got rich paying bribes and pranks at both ends, leaving huge pollution and disease infested poor country dumps that smelt to high heaven and infecting local land and water; just like the bankstas do today. When you pay negative to move the stuff, all hell breaks loose, as the system is in total corruption by definition...the mafias make a killing always, they have the inside track.
Help me to understand this....the shipping lines are being subsidized to move "stuff" from A to B. So it's not really an opportunity other than to keep things moving along.
Really? Isn't the whole point here to move stuff that people want to sell? But if you don't have anything to sell then what's the point? I'm cornfused, I wouldn't think shipping would be a big impediment to the sale of something, if there was something to sell. So if these were non-profit organizations things would still not be shipped via ocean going frieght?
I don't get it. Why not just fuel the ships up and have them steam around in circles?
There are still goods to move, just too many boats competing for the load. Why not just go empty? Probably insurance reasons, etc. You might need to be under contract to be covered.
aggregate demand is sinking deeper
(sorry for the pun)
If the damn things are underwater.......quit calling them ships.They are now Submarines.
Narco subs
http://www.youtube.com/watch?v=gVQgjeUWzOc
Got it! Got it! Let's put together a Zerohedge cruise... Tyler?.....Tyler....? At these prices....
If only there was an Italian captain available
.
Just spoke to Steve Rodley, Glencore is paying for the fuel and the shipment moves the ship to the Atlantic where there is stronger demand.
Demand implies just that. How much demand can there be if you make money shipping your things? I guess you might see some tax and fee revenue, but after that ??????
I should probably front run SPG ahead of any bullish break out when we learn that Reits begin using these same techniques, paying shop renters to stay.
The banks are going to furious that they can't get negative nominal rates on treasuries.
oh no. they will get that. they want to bleed savings as quickly as possible.
What might occur is certain changes to the tax code that allow write offs for things like negative nominal rates. Certainly the shipper will be seeing a tax loss on negative shipping rates.