Archive for the ‘Shipping’ Category

“Another Wild Ride on the Baltic?”

The Baltic Dry Index has slid toward a two year low—almost unnoticed!

When last I wrote an article asking whether the Baltic Dry Index was telling us something about the economy it had fallen 33 straight days, to 1,790 (Jul 13,10), and two days later hit its low at 1,700 (Jul 15,10).

Last July the Baltic was sliding toward 1,500 seemingly contradicting the predictions of a growing economy and the rapid growth in China. And after reaching its low on July 15th the index began a steady rise to 4,507 in November.

Since that November high the BDI has steadily declined to 1,043 on Friday, and rose to 1065 on Tuesday. Part of the problem is the glut of new ships coming online as described by Ryan Eden in his article at The Street, “Dry Bulk Shippers Continue Deep Slide,” in January.

Is the BDI telling us something about the future of the global economy?

Read the rest of this entry »

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“The Baltic Index Sliding to 1,500?”

Is the 33rd consecutive day of decline problematic?

The Baltic Dry Index fell for the 33rd consecutive day settling at 1790, a decline of 561 since the first of July.

CSX reported good numbers for the quarter yesterday. But the transporter of coal may find distress if the Index indicates a falling demand for dry bulk shipments to China.

It also appears that iron ore demand has declined in China. If, in fact, it is falling instead of just the addition of more ships them the BDI is an indicator of the slowing global economy. If the number of ships has increased then it is, obviously, a contra indicator of real shipping demand.

Either way, it is important to keep a watchful eye and be at least slightly fearful if it continues its precipitous fall!

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Quick Hit: “Dry Shipping Sinking Fast!”

Is dry shipping headed for Davy Jones Locker?

Avast matey, ‘fore you jinx dry shipping, cursing them to a watery grave.

I assure you, it shall not be a malediction of my making that causes the Baltic Dry Index to continue its slide below 2000, or further.

The Baltic’s 29th straight day of decline, to its lowest level in over a year, may be telling us something we do not want to know. Just one year ago the Index sat at 3375 and has fallen nearly 50% from the 2010 peak of 4209 just 29 days ago.

After December 24th the Baltic went on Mr. Toad’s Wild Ride. It had just completed a 14 day slide which left it poised to fall below 3000. It continued the wild ups and downs hitting a low of 2566 on February 15 and reaching its high of the year on the 26th of May. The wildness has ended with the recent slide and the BDI settling at its new low of the year—down 89 today, to 2127.

It may be an important index to watch the next few weeks to get a glimpse into the global economic future.

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“24 Day Slide for Baltic Index!”

Is the Shipping Index Signaling Rough Seas Ahead?

The Baltic Dry Index continued its slide on Wednesday falling another 41 points to 2406. The drop was the 24th straight down day since its high of 4209 on May 26. In an article on June 14, “Diving Into the Baltic!,” I reported that the BDI had declined for 12 straight days. It was then at 3115 and had fallen 173 points that day.

Now, the 1803 point drop puts the index at the lowest level since October 5 of last year and the lowest level in 2010. The previous low for the year was 2566 on February 15.

It is now threatening the October 1st low, just 122 points lower, and could be headed for the September 25 low of 2163.

The BDI may not be as good an indicator of the future economy as it has been in the past but still points to pressure on the shipping industry and possibly the rough sailing ahead for a potential recovery.

Keeping an eye on the future!

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“Diving Into the Baltic!”

The Baltic Dry Index continues its decline from recent heights!

Just over 2 weeks ago I was going, for the second time, to admit that I was wrong about the message the Baltic Dry Index was communicating. It reached its highest level in a little over 6 months on May 24th rising to 4,209. It has fallen since that date for 12 consecutive days to 3,115 after falling 173 points today. It has declined by 1,094 in that 12 day period.

The last time it was below 3,115 was on April 26 when it sat at 3,020 after hitting a low of 2,911 on the 12th.

I was about to write an article of contrition about the Index after it had risen steadily to its peak on March 15 to 3,574, after having written Quick Hit: “A Wild Ride on the Baltic,” on the 22nd of February. At the conclusion of the article, about the two month roller coaster ride, I posed the question at the end—‘Is the Baltic Dry Index signaling problems ahead?’

I’m not sure what the decline over the last 12 days means, but I must ask again…

Is the Baltic Dry Index signaling problems ahead?

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Quick Hit: “A Wild Ride on the Baltic”

This is not Monopoly nor is it Mr. Toad’s Wild Ride at Disneyland. This is serious and it’s not a ride the shipping industry wants to be on.

Do not pass Go, do not collect $200.

On December 24th I wrote that the Baltic Dry Index had fallen for 14 straight days to a low of 3,005 and was threatening to fall below 3,000 for the first time since October 28th.

After the 1st of the year, the next 22 days the Index looked like a frenetic ride at the famed Disneyland Theme Park. Up and down it went reaching its high of 3,299 on January 15th. It toyed with the highs for the next 6 days, but on the 26th it began its recent decline.

With the exception of a couple small bumps, it has fallen to a low of 2,566. The last time it was below 2,600 was October 7th. It has fallen 2,095 points since its most recent high of 4,661 on November 19th.

The Index has again found its way upward and has risen 148 points to 2,714 over the last 4 days.

But still, the question should be posed.

Is the Baltic Dry Index signaling problems ahead?

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Quick Hit: “Is the Baltic Dry Index Signaling Problems Ahead?”

The Baltic Dry Index has been declining for 14 straight days and is threatening to sink below 3,000 today!

The last time it was below 3,000 was on October 28th when it was 2,986. Its low in 2009 was January 5th when it hit 772 on the second business day of the year. It started the year at 774 on January 2nd, and hit the high for the year, peaking at 4,661 on November 19th.

Is this a signal of a drastically slowing economy? Possibly.

It’s clearly a sign of shrinking global shipments. A sign that consumers are not stepping up and buying.

Over the six months from its peak the index fell 11,000 points to its low in January. Obviously it can’t fall that much during this decline, but a decline of only 3,900 from this year’s peak will put us again at the 2 year low.

Surely it won’t sink to that low in meteoric fashion, but, the next 2 weeks are critical and will give an indication of the direction the economy will go in 2010.

Keep an eye on this important index.

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“Maersk’s Economic Bruise”

In the first nine months of two-thousand and eight everything was smooth sailing for the big shipping companies, especially for the largest shipping firm in the world—Maersk. But, the storm was brewing the last quarter of the year and since the beginning of 2009 it hasn’t been smooth sailing for them or any other shipping company.

The shipping giant reported 3rd quarter losses of $778 million and expects losses to exceed $1 billion for the year. This shipping news doesn’t raise enthusiasm for a recovering economy.

In a recent article by John W. Miller in the Wall Street Journal, “Maersk Signals Slow Sailing Ahead,” Maersk CEO, Nils Smedegaard Andersen sees rough sailing through 2010. Paraphrasing Mr. Andersen, “the shipping industry in general will remain under pressure in 2010.”

Maersk is not the only shipping company with “The Shipping Blues.” Neptune Orient Lines Ltd expects losses of $636 million this year. HHLA AG said its 2009 container revenue would fall 30%. And the bankruptcy of Eastwind Maritime a few months ago reduces global fleet size, but still exposes the fragility of shipping companies under current economic conditions.

Under the pressures of a trade boom bubble that could possibly burst, shipping companies stand to lose billions more through the next couple of years. The industry bet heavily on a fervent global economy and many placed orders for new ships during the height of the economic growth. Now they are scrambling to cancel orders, delay deliveries, or negotiate drastically lower prices.

There is at least some slightly positive shipping news. After the worst September at the Port complex of Los Angeles and Long Beach in 9 years, exports were up in October at the Port of Los Angeles. Ronald D. White who has been covering the West Coast ports, reported the increase in exports in his Los Angeles Times article, “Tide may be changing at Port of L.A.

Despite the increase in exports at L.A., exports were down at Long Beach 10.1 % and imports were down at the 5 biggest West Coast ports by 14.2% in October compared to a year ago. It will difficult to see a ‘real’ recovery until shipping recovers.

Maersk and other shipping companies have been badly bruised by the economic slowdown and it appears it may take a long time for that bruise to heal. As shipping goes, so goes the economy.

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“Britain’s Shipping Fuse”

Just when you thought there could not be any more bad shipping news, there’s more.

What I failed to discuss in the previous 3 shipping articles was the potential demise of the world’s shipping companies and the damage these failures could do to the banks that make the loans that buy the ships that ship the goods all over the world.

The collapse of Eastwind Maritime in the late summer sent shivers throughout the maritime financial sector. The problems the industry faces are covered in an interesting piece by Landon Thomas Jr. in the New York Times entitled, “As Shipping Slows, Banks and Carriers Fear Loan Defaults.”

Shipping companies and banks, in the UK, Germany, and Sweden, are concerned by the 25% drop in global trade; the affects it will have on shipping rates, and the over abundance of new ships ordered by these companies from the nation’s shipbuilders during the height of the economic boom. This shipbuilding problem was addressed in “The Shipping Blues,” the first article in The Cutting Edge shipping series.

But the problem now extends to the banks. Two of the already troubled banks in England, Royal Bank of Scotland, and Lloyd’s, are heavily vested in financing the shipping industry and failure here will add to their already insurmountable problems. The Bank of England infused the two banks with another $43 billion british pounds ($73 billion U.S.) just last week to stabilize them.

At the current decline in shipments some foresee a future oversupply of container ships by as much as 50%. To prevent that shipping companies are beginning to cancel or delay the delivery of the newly order vessels in an effort to reduce the size of their fleets.

The implication is that the perfect storm is forming for the shipping industry and their over-zealous lenders. That sinking feeling is real and could destroy any chance of a global economic recovery.

The fuse is lit. Now we’re just waiting for the explosion hoping that somehow we can avert disaster.

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“Shades of Shipping Hues”

Shades and hues
of shipping news,
Will not diffuse
the Shipping cues.

And markets choose
or just refuse
to see the clues,
Of the storm that brews
around The Shipping Blues.

There is even more depressing news about the difficulties in the shipping industry. Even niche ports, such as the Port of Hueneme, are being affected by the slowing economy.

The Port of Hueneme, in Ventura County, south of Oxnard, north of Los Angeles lost $1.3 million during their fiscal year ended June 30. The profit at the port was $1 million the previous year. The port relies mostly on automobiles and produce at their 130-acre facility.

Ronald D. white, author of the informative article about the problems at the largest ports in the country, has also written about the difficulties at Port Hueneme, “Tiny Port Hueneme is hit by perfect storm.”

The perfect storm White describes is further evidence of the head-winds confronting a perceived recovery.

Despite the need to rebuild inventories the ports have not seen the benefits. The ports are clearly a leading indicator of the economy, and judging from the current traffic, the future doesn’t look too promising.

The ports are indicating that there is little demand for either imports or exports. Demand is down because the consumer’s purchase power has declined drastically. If the consumer is not able to buy the products there is no need to restock inventories.

Until the consumer returns to spending; which cannot be accomplished without jobs, rising salaries, and a reduction in debt, we can expect a slow holiday season.

Maybe then we will see a ‘real’ decline in the overheated stock markets.

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