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Baltic Dry Index
marketwinner
post Posted: Mar 17 2018, 08:20 AM
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In Reply To: nipper's post @ Feb 2 2018, 08:43 AM

https://www.hellenicshippingnews.com/baltic...-down-7-points/

Baltic Dry Index falls to 1143, down 7 points

 
nipper
post Posted: Feb 2 2018, 08:43 AM
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Baltic index revamp puts focus on iron ore, coal
QUOTE
The Baltic Dry Index, a decades-old measure of shipping costs viewed by some investors as a leading economic indicator, is getting a makeover. The measure will now get its heaviest weighting from giant Capesize ships that haul iron ore and coal, while the smallest Handysize carriers are removed altogether. The alterations follow interest from exchange traded funds and family offices about the creation of a global freight benchmark in which they could invest, said Stefan Albertijn, Chair of the Baltic Index Council.

"Over the years there has been considerable interest from the commodity and financial community in trading the BDI," said Albertijn, who also runs Antwerp-based shipping company Ocean Finance & Consultancy. "We're excited by the prospect of exchange-traded funds based on the BDI."

Known in the industry as the BDI, the Baltic Exchange-published index sometimes captures early demand surges for industrial commodities that in turn point to economic expansions. While that can make the measure appealing to investors, its usefulness as a leading indicator is fast diminished in periods when fleet expansions flood the market with vessels, thereby making rates unresponsive to increased cargo buying.

The latest shift is designed to address the fact that there's not enough derivatives trading of Handysize rates for financial institutions to create the necessary hedges of the over-arching BDI, Albertijn said. By eliminating those smaller vessels, the BDI will now reflect charter prices where there are appropriate underlying derivatives markets, he said.

The Baltic Dry, whose origins stretch back more than three decades, has been a composite of rates for different moving commodities, which until now has been equally weighted across four ship types: Capesizes, Panamaxes, Supramaxes and Handysizes. Now, the biggest carriers will represent 40 per cent of the measure while Panamaxes and Supramaxes will account for 30 per cent each. There will be an annual review of the vessel types that constitute the Baltic Dry, and tests showed a 99 per cent correlation between the reweighted measure and the old one, according to Albertijn. The Baltic Exchange will continue to publish rates for Handysizes.
Bloomberg



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"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

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Mags
post Posted: Jun 6 2017, 09:02 AM
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In Reply To: nipper's post @ Jun 5 2017, 10:08 PM

Wow... Wow, knew nothing about this.

 
nipper
post Posted: Jun 5 2017, 10:08 PM
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Canary in the coalmine?

"..Germany’s third-largest shipping firm filed for insolvency on Friday after it was cut loose by one of the country’s biggest shipping lenders, a sign that Germany’s long-simmering shipping crisis has reached a boiling point.

Rickmers Holding said lender HSH Nordbank backtracked on an understanding that it would restructure the company’s debt, forcing it to file for insolvency. HSH Nordbank said its board examined the Rickmers plans carefully before deciding they weren’t viable. Rickmers bondholders said they expected the firm’s owner, Bertram RC Rickmers, to “gut” the company’s assets.

Frank Gunther, managing director at One Square Advisors, the chief representative for bondholders, said money could be recovered from Rickmers if an investor is found to help finance restructuring. Mr Gunther said he was surprised HSH Nordbank didn’t agree to the original restructuring.

“Rickmers is maritime royalty,” said Basil Karatzas, chief executive of New York-based Karatzas Marine Advisors. “Seeing them file for bankruptcy is like seeing a king get deposed...."

(not the company itself, but the abandonment... has it come to this?)



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"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

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triage
post Posted: Nov 25 2016, 10:31 PM
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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











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"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
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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

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nipper
post Posted: Sep 12 2016, 08:00 PM
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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
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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
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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
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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
 
 


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