Registered Members Login:
   
Forgotten Your Details? Click Here To Recover +
Welcome To The ShareCafe Community - Talk Shares And Take Stock With Smart Investors - New Here? Click To Register >

20 Pages (Click to Jump) V  < 1 2 3 4 5 6 > »    
 
  
Reply to this topic

Baltic Dry Index
triage
post Posted: Nov 25 2016, 10:31 PM
  Quote Post


Posts: 3,899
Thanks: 1575


Another example of China's reverse midas touch (as in, everything they touch turns to shit). The ship building industry of north Asia is collapsing. There is some growth in relatively small niche markets that European companies focus on but in dry bulk, tanker and container ship building, which is by far the largest sectors in the industry and which is where the Chinese have been attacking the Japanese and Korean ship builders, things have been getting progressively worse every year since 2013.


QUOTE
Globally, orders for ships plunged 77% so far this year through October. But 2015 had already been down 13% from 2014. And 2014 had been down 26% from 2013, the first good year since before the Financial Crisis. In 2007, orders had peaked at 92 million compensated gross tons (CGT). So far this year, orders are down to 10 million CGT. At this rate, 2016 will be the worst year in BIMCO’s data series going back to 1996. Even back then, orders amounted to 18 million CGT.


http://wolfstreet.com/2016/11/24/shipbuild...iral-of-orders/

The BDI itself has gone gangbusters since hitting a low of around 300 in February this year and is now over 1000. But if you look at the graph of the BDI over the last 7 years then the index still suggests that there is no shortage of dry bulk carriers.

https://www.quandl.com/data/LLOYDS/BDI-Baltic-Dry-Index











--------------------
"The market can stay irrational longer than you can stay solvent." John Maynard Keynes

"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought." Rudiger Dornbush

Mozart fixes everything and Messi is a dog
 
triage
post Posted: Sep 14 2016, 11:05 AM
  Quote Post


Posts: 3,899
Thanks: 1575


In Reply To: nipper's post @ Sep 12 2016, 08:00 PM

The collapse of Hanjin seemingly affects the container segment rather than the bulk dry carrier segment that the BDI tracks, and which is relevant to Australia being one big pit, but I think the reasons for its collapse afficts the BDI segment as well: ship owners assumed that global growth would be higher than has eventuated, so there are too many ships chasing too few a loads.

http://www.bloomberg.com/news/articles/201...easpan-ceo-says

Not so sure about the idea that Hanjin's collapse is a "Lehman moment" nor about the statement that "[] one thing’s for sure: This fallout will help demand and supply."

My understanding is that Hanjin owns some of the vessels it uses but also leases a fair number. I would have thought that the lessors would fairly quickly go looking for new lessees at whatever the going lease rates are, in what is a depressed market. And at some point the Hanjin owned vessels will be put up for sale, again at knock-down prices. So unless they scrap those vessels there will be the same supply of ships, with the ex-Hanjin vessels having much lower breakeven costs, chasing the same muted demand.

The only reason I would see a spike in transport costs for containers is that manufacturers have only a small window to get their products to retailers for the the coming retail peak season (I think I remember reading that many small retailers in Australia do about a third of their annual trade in the month and a half or so leading into Christmas: not have enough stock during that period and they are busted).



--------------------
"The market can stay irrational longer than you can stay solvent." John Maynard Keynes

"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought." Rudiger Dornbush

Mozart fixes everything and Messi is a dog

Said 'Thanks' for this post: mullokintyre  
 
nipper
post Posted: Sep 12 2016, 08:00 PM
  Quote Post


Posts: 9,473
Thanks: 2773


In Reply To: nipper's post @ Mar 3 2016, 05:34 PM

QUOTE
A container ship has been "arrested" in Sydney Harbour as the collapse of Korean-based Hanjin, one of the world's biggest container shipping lines, spreads confusion around the world's freight network. The Hanjin California could be stranded for some time at the Glebe dock in inner Sydney after Glencore Singapore won a Federal Court order impounding the ship over a debt owed for "bunkering", or ship fuel.

Hanjin, South Korea's biggest container company with 97 ships, filed for bankruptcy protection in Seoul last month, leaving scores of vessels effectively stranded at sea. Ports in the United States, Asia and Europe turned them away because Hanjin could not guarantee payment of port charges. Another Hanjin ship was arrested in the US last week.

Hanjin is one of many global shipping companies that are struggling because they expanded their fleets in expectation of growth in world trade that never eventuated.

Teresa Lloyd, chief executive of Maritime Industry Australia, an industry body, said other shipping companies are hoping that they will be able to capitalise on Hanjin's demise to build their own business. "The international shipping industry is in dire straits. Some people are hoping this is a "Lord of the Flies" moment where one company dies and the others survive."

In the meantime the bankruptcy of Hanjin, a huge container line, will be more disruptive than similar recent failures in oil and bulk shipping because it carries sensitive consumer cargo which must be delivered in time for Christmas. Because of its global span, the Hanjin bankruptcy also threatens to take a long time to sort out.The Hanjin California, with a capacity of 4000 containers, docked in the Port of Botany, Sydney's busy commercial port, on September 3 and most of the Australian cargo was unloaded.

The Federal Court then arrested the ship and ordered the Admiralty Marshall to move it out of Botany Bay and around to the little used dock in Glebe in Sydney Harbour. Since the ship could be stuck for some time, NSW Ports said it wanted to move it out of the way. "Vessels arrested at a port have the potential to impact on port operations and create uncertainty for cargo remaining on the vessel," it said...




--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Mar 3 2016, 05:34 PM
  Quote Post


Posts: 9,473
Thanks: 2773


In Reply To: triage's post @ Jan 19 2016, 09:41 AM

QUOTE
For the first time since the early 1990s, combined trade in coal and iron ore is poised for two straight years of contraction, predicts Clarkson Research, part of the world's biggest shipbroker. Almost every type of commodity carrier will fail to make a profit this year, and they'll earn almost nothing in 2017, according to analysts' forecasts and industry breakeven figures compiled by Bloomberg.

The current crisis stems from a shipbuilding boom that doubled the fleet's capacity in the seven years through December, which included a bull market in commodity prices as global demand surged. Owners increased new-vessel orders when rates rose to a record from 2007 to 2009, wagering that China's near double-digit economic growth at that time would persist. It was a bad bet. Instead, the world's second-largest economy is expanding at the weakest pace in 25 years.

As ship owners wrestle with oversupply, they are scuttling older vessels at an unprecedented pace. A record 88 capesize bulkers were broken up last year, and 14 had already been scrapped at the end of January this year, according to GMS, which buys ships destined for demolition. It may not be enough. Wrecking yards would have to scuttle more than three times the number of ships scrapped last year to stabilize freight rates, according to Herman Hildan, a shipping-equity analyst at Clarksons Platou Securities in Oslo.

Owners saddled with more ships than they need are faced with a choice: leave vessels waiting at major ports in the hope that rates pick up, or carry on shipping unprofitably. For now, many are choosing the latter.

While some ships are sitting idle, most are on the move. Average waiting near Port Hedland in Australia was four days for 80 Capesize ships preparing to load iron ore, according to data compiled by Bloomberg. Off Brazil, it was five days for 36 vessels. Of vessels monitored near China, the average was two days.

...................... Commodity prices and demand are so lousy, freight rates for the biggest ships don't even cover a third of the cost of their crews. While owners would normally idle ships when things slow down, hoping to spark a rebound in rates, the outlook this time around is so dire that many figure it's better to have some business. Otherwise, they risk losing market share and earning nothing....
Bloomberg http://www.bloomberg.com/news/articles/201...roying-shippers



--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
triage
post Posted: Jan 19 2016, 09:41 AM
  Quote Post


Posts: 3,899
Thanks: 1575


Goes to confirm that not only do bubbles explode rather than deflate it also shows yet again that markets swing wildly to the extreme, to the low side as well as the high side. BDI keeps plunging lower and lower, now at 369.

QUOTE
The sector's statistics for the year so far make for sober reading; the Baltic Dry Index has fallen on every single one of the 11 trading days so far in 2016, and it has been at a record low for all but one of those, having started the year on January 4 at 473 - just two points above the at-the-time record low.


...

QUOTE
"It's difficult to believe the [Baltic Dry Index] was at 1,222 less than six months ago," an industry source Ship & Bunker spoke to today commented, who was referring to the Index's current 52-week high set on August 8, 2015.


http://shipandbunker.com/news/world/200487...fall-under-3000

... and just for some context, here is a chart of BDI over the years from ZH. The boom years for commodities are past tense.

http://www.zerohedge.com/sites/default/fil...151119_bdiy.jpg

(h/t Hugh Pavletich on macrobusiness)



--------------------
"The market can stay irrational longer than you can stay solvent." John Maynard Keynes

"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought." Rudiger Dornbush

Mozart fixes everything and Messi is a dog
 
triage
post Posted: Nov 20 2015, 12:06 PM
  Quote Post


Posts: 3,899
Thanks: 1575


In Reply To: triage's post @ Nov 20 2015, 07:19 AM

As with the transport of bulk dry materials the cost of shipping containers has hit an all-time low. This analysis blames this situation on too many ships being built in recent years rather than a collapse in materials requiring shipping. That is, this sector suffers from the same malaise as the dry bulk carriers, or so it would seem: a supply side imbalance..

https://www.flexport.com/blog/why-are-ocean...t-rates-so-low/

But again I reckon the problem lies in the second derivative, not the first derivative, Yes demand for shipping has not collapsed and yes there has been a surge in the supply of ships. But the reason why all these ship owners invested in extra capacity is pretty much the same reason why so many iron ore producers increased their production levels: the expectation three or four years ago was that China would continue growing at 10% possibly, with 7% compounded growth being thought of as a low scenario. At the moment there any plenty of indicators that China is growing at much less than 7%, more like 3-4%. Stick those figures in a spreadsheet and the size of the markets that these bulk carriers and container vessels will have against what was expected they'd have and you have a full-on blow-out.



--------------------
"The market can stay irrational longer than you can stay solvent." John Maynard Keynes

"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought." Rudiger Dornbush

Mozart fixes everything and Messi is a dog
 


triage
post Posted: Nov 20 2015, 07:19 AM
  Quote Post


Posts: 3,899
Thanks: 1575


In Reply To: triage's post @ Nov 20 2015, 06:53 AM

And just to follow up on ZH's piece about the BDI being at all-time lows, they have this article about how Caterpillar, the world's benchmark for mining machinery, is struggling through a prolonged period of falling sales (not as severe as the GFC dip but of longer duration).

http://www.zerohedge.com/news/2015-11-19/c...lan-how-deal-it

A couple of interesting tidbits:

First is that Caterpillar have built in remotely controlled kill switches in its machinery so that if a contractor falls to make a lease payment the company can immobilise the equipment. Unless the Chinese have found a way around this then they will be left with a lump of metal in the middle of their project.

And the second thing I found interesting is just how cheap some of these machines are second hand.

So the shipping costs have tanked and a major supplier of machinery is seeing ongoing sales lows. The omens surely are that things will remain crook in the mining industry for the foreseeable time.



--------------------
"The market can stay irrational longer than you can stay solvent." John Maynard Keynes

"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought." Rudiger Dornbush

Mozart fixes everything and Messi is a dog
 
triage
post Posted: Nov 20 2015, 06:53 AM
  Quote Post


Posts: 3,899
Thanks: 1575


For what it is worth ... this particular canary is as dead as monty python's parrot:

QUOTE
Having fallen for 20 straight days, crushing the hopes and dreams of the mid-year bounce - and thoroughly breaking down from seasonally positive tendencies - The Baltic Dry Freight Index has collapsed to all-time (back to 1984) record lows.

At 504, this is the lowest cost for dry freight ever ...


http://www.zerohedge.com/news/2015-11-19/t...ever-been-lower

As the article explains this collapse in freight prices is at the first instance due to an over-supply of ships rather than a collapse in material to be shipped. But the point is that all these new ships were built on the assumption of demand growing at a certain rate which as it turns out has not eventuated.

As the ZH article indicates, from a copy and paste from Bloomberg, iron ore imports by China are simply not growing at the rate that the shipping growth spurt was predicated on:

QUOTE
A surge in China’s imports of iron ore will slow to just 1 percent in 2016, about half this year’s expansion and the weakest pace in six years, according to data from Clarkson Plc, the world’s biggest shipbroker. Global trade in the raw material will increase the most slowly since 2001. China’s economy will grow by 6.5 percent in 2016, the least in a generation.

“The main issue is the lack of demand for iron ore from China,” Eirik Haavaldsen, an analyst at Pareto Securities AS in Oslo, said by phone. “This market is looking like a disaster and the rates are a reflection of that. It is looking scary for the market and it doesn’t look like there is going to be any life in the market in the near term.”




--------------------
"The market can stay irrational longer than you can stay solvent." John Maynard Keynes

"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought." Rudiger Dornbush

Mozart fixes everything and Messi is a dog
 
nipper
post Posted: Jul 15 2015, 08:30 AM
  Quote Post


Posts: 9,473
Thanks: 2773


QUOTE
The profit outlook for transportation stocks, particularly ocean shipping companies, is horrible.

The story was about container ships facing the business-killing environment of expenses exceeding revenues. According to the Wall Street Journal, the container-freight rates on the Asia-to-Europe route have sunk like rocks and are now below the cost of fuel. And that doesn't even include all the other fixed and variable costs.

The Shanghai Containerized Freight Index—the cost of shipping a container from Shanghai to Rotterdam—fell to $243 per TEU (twenty foot equivalent unit), a new all-time low and below the cost of fuel, estimated to be $300 per TEU.

That's right: For every container an Asia-to-Europe ship transports, it will lose $57. Ouch!

There are a lot more costs to operating a ship than just fuel, which is estimated to account for 40% of operating costs. Drewry Maritime Research estimates that the break-even rate for most container ships is $800 per TEU on that route.

Global demand is weak, but the real culprit is a massive increase in the number of container ships that have come online, mostly ULCSs (Ultra Large Container Ships).

Braemar ACM Shipbroking reported that the industry has added enough capacity to carry 500,000 containers in just the first quarter of 2015. To put that number in perspective, a total of one million containers were shipped in all of 2014!

That's a 50% increase in capacity.

That supply is going to get even larger. There are backorders for 55 more container ships, 30 of them with a capacity of 18,000 TEU, 12 in the 10,000-11,000 TEU range, and 13 in the 1,400-4,000 TEU range.

Maersk Lines, the largest container shipping company in the world, ordered 11 ULCSs capable of carrying 19,600 TEU, with options for six more from South Korea's Daewoo Shipbuilding & Marine Engineering.

"Unless by a miracle demand grows, we are up for heavy losses in the next quarter and maybe the rest of 2015," moaned one industry executive.

This is exactly the type of misallocation of capital you see when the cost of money is taken down to zero.

This oversupply isn't going to get worked off for years, and while the transportation industry is in trouble, the sickest part of the transportation food chain are the ocean-going shippers.


Connecting the Dots, with Tony Sagami







--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: maxwellreid  early birds  
 
marketwinner
post Posted: Jul 20 2013, 06:41 PM
  Quote Post


Posts: 431
Thanks: 36


In Reply To: wren's post @ May 24 2013, 10:50 AM

http://wallstreetsectorselector.com/2013/07/baltic-dry-index-indicator-on-the-move/#

BalticDry Index Indicator On The Move?



Said 'Thanks' for this post: triage  
 
 


20 Pages (Click to Jump) V  < 1 2 3 4 5 6 > » 

Back To Top Of Page
Reply to this topic


You agree through the use of ShareCafe, that you understand and accept the TERMS OF USE.


TERMS OF USE  -  CONTACT ADMIN  -  ADVERTISING