• Gold Money
    05/03/2016 - 11:35
    Crude oil time-spreads have completely dislocated from inventories. Historically, such dislocations have proved to be short lived. We expect that either spot prices will sell-off again or the back...

Shipping Rates Go... Negative

Tyler Durden's picture




 

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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Mon, 02/06/2012 - 10:48 | 2130449 PapSmear
PapSmear's picture

Upside down world we live in.

Mon, 02/06/2012 - 10:54 | 2130487 hedgeless_horseman
hedgeless_horseman's picture

 

 

They lose money on every trip, but they make it up on volume.

Mon, 02/06/2012 - 10:56 | 2130500 Arthor Bearing
Arthor Bearing's picture

They are burning dollar bills below deck to make steam to power the ship

Mon, 02/06/2012 - 10:59 | 2130509 GeneMarchbanks
GeneMarchbanks's picture

You mean above deck of course.

Mon, 02/06/2012 - 11:02 | 2130513 Pladizow
Pladizow's picture

Must get missing $ palets home?

Mon, 02/06/2012 - 11:08 | 2130542 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

This is just a preview for rest of the private sector. Debt-default bitchez!!

Mon, 02/06/2012 - 11:24 | 2130589 imaginalis
imaginalis's picture

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.

Mon, 02/06/2012 - 11:30 | 2130616 Max Hunter
Max Hunter's picture

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..

Mon, 02/06/2012 - 11:32 | 2130621 trav7777
trav7777's picture

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.

Mon, 02/06/2012 - 11:54 | 2130630 tarsubil
tarsubil's picture

Let's start up our own cruise line!

Take a long peaceful cruise with Metal Box Cruise Lines! We pay you!

Mon, 02/06/2012 - 12:45 | 2130843 Matt
Matt's picture

Let us partake of the fruits of grevious malinvestment.

Mon, 02/06/2012 - 18:17 | 2132106 Betty Swallsack
Betty Swallsack's picture

BDI now down to 647.  -62.77% YTD.

http://www.bloomberg.com/quote/BDIY:IND

Mon, 02/06/2012 - 22:20 | 2132662 FrankDrakman
FrankDrakman's picture

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.

Mon, 02/06/2012 - 12:15 | 2130760 El Tuco
El Tuco's picture

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.

 

Mon, 02/06/2012 - 11:30 | 2130617 Oh regional Indian
Oh regional Indian's picture

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/

Mon, 02/06/2012 - 11:41 | 2130650 The Limerick King
The Limerick King's picture

 

 

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

 

Mon, 02/06/2012 - 12:11 | 2130706 Max Fischer
Max Fischer's picture

 

 

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 

 

Mon, 02/06/2012 - 12:57 | 2130876 juggalo1
juggalo1's picture

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?

Mon, 02/06/2012 - 17:48 | 2132007 bozzor
bozzor's picture

Conversion would be technically very difficult due to design and layout.

Mon, 02/06/2012 - 13:54 | 2131081 narnia
narnia's picture

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.

Mon, 02/06/2012 - 13:30 | 2130999 Zero Debt
Zero Debt's picture

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"

Mon, 02/06/2012 - 12:04 | 2130726 valley chick
valley chick's picture

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 ? 

Mon, 02/06/2012 - 12:38 | 2130828 Oh regional Indian
Oh regional Indian's picture

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

Mon, 02/06/2012 - 13:37 | 2131030 valley chick
valley chick's picture

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...

Mon, 02/06/2012 - 13:56 | 2131087 Oh regional Indian
Oh regional Indian's picture

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

Mon, 02/06/2012 - 15:46 | 2131497 valley chick
valley chick's picture

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.... ;-)

Tue, 02/07/2012 - 01:21 | 2133007 Oh regional Indian
Oh regional Indian's picture

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

Mon, 02/06/2012 - 14:31 | 2131180 azzhatter
azzhatter's picture

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. 

Mon, 02/06/2012 - 11:21 | 2130584 Colombian Gringo
Colombian Gringo's picture

Naw, just buying Iranian oil cheap, arbing differences between Brent Iranian sweet  and selling CDO's.

 

Make sense?

Mon, 02/06/2012 - 11:19 | 2130575 xela2200
xela2200's picture

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.

Mon, 02/06/2012 - 11:20 | 2130578 EscapeKey
EscapeKey's picture

*whoosh*

Mon, 02/06/2012 - 11:39 | 2130646 xela2200
xela2200's picture

Working on ship = scrapping and painting.

Mon, 02/06/2012 - 13:13 | 2130929 zelator
zelator's picture

merchant marines spend more time chipping than doing anything else

Mon, 02/06/2012 - 11:32 | 2130625 tarsubil
tarsubil's picture

Welcome to City 17.

Mon, 02/06/2012 - 10:54 | 2130490 Manthong
Manthong's picture

Shipowners are "underwater".

Geez, will it be the floating boats that finally sink Euro banks?

Mon, 02/06/2012 - 10:55 | 2130495 Arthor Bearing
Arthor Bearing's picture

This is bullshi- I mean bullish

Mon, 02/06/2012 - 11:06 | 2130536 junkyardjack
junkyardjack's picture

Bullish for more people eating iPads

Mon, 02/06/2012 - 13:34 | 2131018 Zero Debt
Zero Debt's picture

Free shitt- I mean shipping

Mon, 02/06/2012 - 11:03 | 2130523 battle axe
battle axe's picture

Gilligan!! What have you done now little buddy???

Mon, 02/06/2012 - 11:18 | 2130569 mikla
mikla's picture

Gilligan

Mon, 02/06/2012 - 11:19 | 2130573 Ignatius
Ignatius's picture

Or perhaps the "just in time delivery" world.

Mon, 02/06/2012 - 13:30 | 2131001 Jumbotron
Jumbotron's picture

Upside down world we live in.

Here's visual proof of that......

http://www.youtube.com/watch?v=9La6AXq8yXY&feature=related

 

Mon, 02/06/2012 - 13:36 | 2131027 ilion
ilion's picture

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. :)

Mon, 02/06/2012 - 10:48 | 2130450 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Hahaha! 

Let's pay someone to fix all of those broken windows we just broke.

Mon, 02/06/2012 - 10:51 | 2130466 achmachat
achmachat's picture

i was going to post the very same thing!

how long do they think they can sustain this travesty?

Mon, 02/06/2012 - 10:53 | 2130483 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

If we close our eyes and pretend it isn't happening, forever!

Mon, 02/06/2012 - 11:31 | 2130484 francis_sawyer
francis_sawyer's picture

"I think we're gonna need a smaller boat"

Mon, 02/06/2012 - 12:21 | 2130785 Acet
Acet's picture

It's the new and improved submarine rates.

Mon, 02/06/2012 - 18:46 | 2132191 Dugald
Dugald's picture

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.....

Mon, 02/06/2012 - 10:57 | 2130502 Uncle Remus
Uncle Remus's picture

Let's make the taxpayers pay someone to fix all of those broken windows we just broke.

There ya go - fixed it.

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