We haven’t looked at Baltic Dry Index in a while –

Despite the high CRB Index, the BDI has not managed to rally much off its post crisis lows. The reason for this: Massive over-building of new bulk transport ships.

Here’s Bloomberg:

“At a time when analysts anticipate record profits for the biggest mining companies and a third year of gains in commodity prices, shipping lines carrying raw materials are set for the lowest freight rates since 2002.

Leasing costs for capesizes, 1,000-foot-long ships hauling iron ore and coal, will drop 34 percent to average $22,000 a day this year, according to the median in a Bloomberg survey of eight fund managers and analysts. The last time that happened, China’s economy, the biggest consumer of the minerals used in steel and power, was 75 percent smaller and the benchmark Standard & Poor’s GSCI commodity index 67 percent lower.

While Clarkson Plc, the world’s biggest shipbroker, expects seaborne trade in the two cargoes to exceed 2 billion metric tons for the first time this year, the 7 percent increase won’t be enough to eliminate a glut. About 200 capesizes, spanning some 35 miles end-to-end, will leave shipyards this year, expanding the fleet by 18 percent, the Bloomberg survey showed.”

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Baltic Dry Index (Arithmetic)

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Baltic Dry Index (Log)


All charts via The Chart Store

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Source:
Freight Rates Tumbling as 35-Mile Line of Ships Sails
Alistair Holloway
Bloomberg, January 10 2011
http://noir.bloomberg.com/apps/news?pid=20601109&sid=aGGcrhkk.VPI&

Category: Commodities, Transports

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

15 Responses to “Baltic Index Overwhelemed by New Ships”

  1. Petey Wheatstraw says:

    Somebody is going to have to eat this excess capacity. Somehow, it will be the American taxpayer. We will own ships. Ahoy, matey.

  2. curbyourrisk says:

    Currently we are seeing very little action on tankers. most of our trading is done via rail right now and ships to/from South America via ports in the Gulf of Mexico. Business is VERY slow.

  3. ashpelham2 says:

    A great example of market imbalances. If there are any basic business professors reading here, take note. Obviously, the market for big ship building is about to hit the skids, and as such the demand and prices for all that steel that is required to build them.

    Yet crude oil just stays up, up, up.

  4. Greg0658 says:

    Rio de Janeiro to the rescue
    http://en.wikipedia.org/wiki/Rio_de_Janeiro_bid_for_the_2016_Summer_Olympics

    would it be anti-progressive to suggest a floatilla of cruise ships and playgrounds and Save the Rain Forrest

  5. rip says:

    Looks like not too many of those Fed subsidized commodities speculators intend to actually take delivery.

    Just another signal of where we are.

  6. Julia Chestnut says:

    Most of that shipbuilding isn’t done here — a lot is in Europe, some in Asia. During the 1990s there was a huge worldwide overcapitalization in the fisheries fleet — it had to do largely with a credit expansion and with subsidies to shipyards. Ships get made in Canada and here too, but it’s not where the largest facilities are.

    It could be that some of these ships were put in motion before the crash when we were still undergoing a large credit expansion and money was still flowing in some of these countries to keep people employed?

    It took a long, long time to depreciate and rationalize the fishing fleet. You can probably look to that prior slow-motion crisis if you want clues to how the market will shake out this time.

  7. Gator81 says:

    I watched an interview on Bloomberg on 9-Dec, with Pimm Fox discussing container shipping with Gerry Wang, CEO of Seaspan Corp. Wang was quite animated, saying his company had a full book and the only thing keeping them from booking more business was that they needed more ships and more containers. He said this was a big turnaround (late 2010) as compared to a year previous (late 2009). He also referenced substantial and sharp increases in containerized freight rates.

    See it here:
    http://www.bloomberg.com/news/2010-12-09/wang-says-seaspan-seeks-more-ships-as-demand-rises-video.html

    So my question is, how does the marine shipping industry get it this wrong? If I follow the discussion above correctly, there are bulk ships out the wazoo while Seaspan has to wait in line to buy container ships. Am I missing something?

    Also… does anybody here happen to know of a traded company that manufactures steel shipping containers?

  8. carleric says:

    It is sort of like the commercial real estate market where projects have long time lines and once starte can’t be abruptly terminated without some pretty severe financial results…..it takes some time to finance and build a large container ship and the market was way ahead of the forecasters….time solves all mistakes just avoid the shippers in the short run.

  9. Gator81 says:

    Correction, the Gerry Wang interview on Bloomberg was 8-Dec.

    Note, Seaspan (SSW) is up about 13% YTD as compared to SPX up about 1%. SSW had been sliding while SPX was gaining, for a couple of months prior to the interview. Gee, you don’t suppose Wang would make himself available for a Bloomie just to pump the shareprice, do you?

  10. sinomania says:

    Julia Chestnut is right this is years in the making. I heard about the expected glut in bulk carriers back in ’08. But I had not heard about demand for container ships. Apart from imbalances in the financing of shipyards how much of this was building in anticipation of the new Panama Canal docks expected in 2014? I know many of the new container ships are specifically in response to the canal widening and mega container ships are coming. Not sure about bulk carriers though unless it was thought oil, iron ore, coal demand was going to be that much greater – and it could be in medium term?

  11. old trader says:

    To Gator81 and ashpelham 2,

    The article SPECIFICALLY states bulk carriers, not container ships or tankers. You guys are comparing apples, oranges, and watermelons.

    ashpleham 2,

    I question how tightly tanker rates correlate to the price of oil. ( I suspect not as closely as you seem to think).

  12. marka says:

    Only going to get worse as flooding in Northern Australia has lead to coal mine closures which means that 132 shipping are sitting off the coast waiting thats approx 50% of the worlds seaborne supply of coal used in steelmaking

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