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Baltic Dry Index - Freight rates for dry cargo ships

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The scale on that one is compressed at the top.

Thanks too, but I was interested in a log-chart to see what the most recent 40% drop looked like in comparison to recent history.

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shipping is in dire straits right now

 

only saving grace is the handysize bulk sector which is performing fairly well, and this mostly a result of the stimulus plans operated by the major world governments. it's anyone's guess what happens after that runs out.

 

containers and tankers, which are more directly linked to consumption (eg plasma tv's and petrol for suv's) are performing very badly right now, especially the container side.

 

nothing leads me to beleive this situation will improve anytime soon, in fact i reckon things are about to get worse as we still have a lot of supply coming on line through 2010 -2012 from asian yards. some owners are cancelling their orders and paying heavy fines, others are taking delivery in the hopes that we are over the worst and they can run the ships at break-even until things pick up

 

shipping has been a classic bubble in the last few years. now comes the hangover. and the first to fall will be the big boys operating those super 8000 TEU's etc

 

last man standing

 

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Thanks too, but I was interested in a log-chart to see what the most recent 40% drop looked like in comparison to recent history.

 

How do you compare recent history with a log chart when recently the value was almost 5 times what it is today?

 

Log charts are i think better to show very very long term changes which would show no detail at all in the past or present depending on how you scale it?

 

You indeed made the point that it does not look so bad. Not surprising if the bad parts are all squashed up so can be hardly noticed! :lol:

 

Maybe you prefer it to be like that? Can it be good for gold to have so little trade and a weak recovery while copper inventories are at record highs? Hard to see it being so good when we are actually in a recovery rather than a collapse

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How do you compare recent history with a log chart when recently the value was almost 5 times what it is today?

The drop towards the end of 2008 is about 40%, the two drops in 2009 are 40% -- you can see that they are identical in relative terms because they have the same size in the log chart. In that sense, nothing to see here. In absolute terms, it doesn't exactly look good of course.

 

Log charts are i think better to show very very long term changes which would show no detail at all in the past or present depending on how you scale it?

No, log charts are all about relative changes. Has nothing to do with time scale, but because of the rampant inflation of our money masters, time means usually huge inflation, so you better look at a log chart for longer time horizons, because the (paper money) figures are mostly meaningless otherwise.

 

Maybe you prefer it to be like that? Can it be good for gold to have so little trade and a weak recovery while copper inventories are at record highs? Hard to see it being so good when we are actually in a recovery rather than a collapse

Some proper trolling here.

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shipping is in dire straits right now

 

only saving grace is the handysize bulk sector which is performing fairly well, and this mostly a result of the stimulus plans operated by the major world governments. it's anyone's guess what happens after that runs out.

 

containers and tankers, which are more directly linked to consumption (eg plasma tv's and petrol for suv's) are performing very badly right now, especially the container side.

 

nothing leads me to beleive this situation will improve anytime soon, in fact i reckon things are about to get worse as we still have a lot of supply coming on line through 2010 -2012 from asian yards. some owners are cancelling their orders and paying heavy fines, others are taking delivery in the hopes that we are over the worst and they can run the ships at break-even until things pick up

 

shipping has been a classic bubble in the last few years. now comes the hangover. and the first to fall will be the big boys operating those super 8000 TEU's etc

 

last man standing

 

Straydog,

 

Do you know anything about shipping that is being used to store oil at a time when there is a oil supply glut? Is that still happening or have things moved on?

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How do you compare recent history with a log chart when recently the value was almost 5 times what it is today?

 

Log charts are i think better to show very very long term changes which would show no detail at all in the past or present depending on how you scale it?

 

You indeed made the point that it does not look so bad. Not surprising if the bad parts are all squashed up so can be hardly noticed! :lol:

No. Log charts are there to show the same RELATIVE drops as the same size.. i.e.

With a logarithmic chart, the Y axis is structured in such a way that an equal distance along it represents an equal *percentage* change.

 

10% off 100 to a value of 90 would therefore be the same sized drop as 10% of 1(i.e. a drop from 1. to 0.9). So I think GF wanted to see how the 40% drop related to the other recent massive drop(s).

 

EDIT: it also shows detail of recent moves which would be masked by the peak at ~11000.

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No. Log charts are there to show the same RELATIVE drops as the same size.. i.e.

With a logarithmic chart, the Y axis is structured in such a way that an equal distance along it represents an equal *percentage* change.

 

10% off 100 to a value of 90 would therefore be the same sized drop as 10% of 1(i.e. a drop from 1. to 0.9). So I think GF wanted to see how the 40% drop related to the other recent massive drop(s).

 

EDIT: it also shows detail of recent moves which would be masked by the peak at ~11000.

 

Thanks and thanks also to Goldfinger for pointing out the nature of a log chart to me

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Straydog,

 

Do you know anything about shipping that is being used to store oil at a time when there is a oil supply glut? Is that still happening or have things moved on?

 

I heard about this on BBC but I dont see anybody in our direct environment doing it. doesnt make much sense to me.

 

anecdotally i can tell you that our tankers are generally moving, they can be on anchor without cargo sometimes for up to a week, and once they get a payload it is for pretty dire charter rates (at the peak in 2007-08 you could have a daily rate of 50k usd, in 2009 we are down to 10k on average, sometimes much less). but we are a top-notch operator with brand new vessels and highly trained crew. many are doing much worse than we are.

 

the market is bad, shipping is very bad, make no mistake about it. major operators like hapag lloyd and dohle are being bailed out by the german government (now the EU regulators step in to challenge the bailouts) , and nobody knows where it will end. there is a chronic oversupply of tonnage right now and that will take a loooong time to work through

 

no quick fix for this one i'm afraid.

 

 

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I heard about this on BBC but I dont see anybody in our direct environment doing it. doesnt make much sense to me.

 

anecdotally i can tell you that our tankers are generally moving, they can be on anchor without cargo sometimes for up to a week, and once they get a payload it is for pretty dire charter rates (at the peak in 2007-08 you could have a daily rate of 50k usd, in 2009 we are down to 10k on average, sometimes much less). but we are a top-notch operator with brand new vessels and highly trained crew. many are doing much worse than we are.

 

the market is bad, shipping is very bad, make no mistake about it. major operators like hapag lloyd and dohle are being bailed out by the german government (now the EU regulators step in to challenge the bailouts) , and nobody knows where it will end. there is a chronic oversupply of tonnage right now and that will take a loooong time to work through

 

no quick fix for this one i'm afraid.

Cheers straydog sounds ghastly!

 

I am interested in the mechanics of shipping how does one work through a supply glut, do vessels get scrapped? Do operators face heavy overheads for storage of non operating vessels, can they stand idly by ready for a quick redeploymentor are many alraedy being scrapped?

 

How long would it be until we end up with a shortage of vessels such that any uptick in activity would lead to a sharp increase in prices?

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Quite interesting. He's making a case that the Baltic Dry Index no longer represents global shipping activity and this divergence started back in 2008

 

The Economics of Disrespect
Compare actual ships on the seas with the Baltic Dry Index . Secret trade 4.63 times (463%) of reported trade is deduced . Taxation bases vanish and stimulatory measures seemingly don’t work , but they probably do . The good news just never reaches the Taxman’s ears .
Big Business has lost any respect for bankers and government regulatory attempts .
Once respect is lost , laws are no longer obeyed .
Taxes become nearly impossible to collect except at armed-robbery level .
If the ruler does not perform , he (or his dynasty) gets the old heave-ho .
The mechanisms vary as per the society , but is exceptional that a whole population will follow a ruler into extinction .
4.The steps :
4.1 Loss of Respect .
4.2 Loss of Fear
4.3 Active Defiance
4.4 Refusal to pay Taxes .
4.4.1 Diversion of Ex-Taxes into Alternative Economy (this is Black Market , smuggling , informal sector , etc)
4.5 Armed resistance to tax collectors .
4.5.1 This is funded by higher returns from efficiencies of informal sector . Near zero overheads .
4.6 Guerilla War
4.7 Full scale rebellion .
4.8 New Dynasty/King/President/Chief .
4.9 The cycle repeats
New Alternative Economy
The old formal Sector is simply ignored .
Historically :
Any minority group lording it over the majority always enforced Respect .
They knew full well that any insolence is the first step to their ruin .
The New Paradigm will gleefully feast on the old one .
What does all this mean ?
Revolution and rebellion . Respect has been lost . The rest follows .

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(For Greg Hunter - as posted under : Gregory Mannarino-Cracks in the Debt Bubble )

 

Forget about the Baltic Dry Index, Greg.
I used to trade it, years ago, and understand it better than 99% who write about it.
Here's what you need to know:
The Index is set by Supply and Demand, right?
Well, years ago when freights rates were healthy, too many ships were ordered - at one stage there were as many ships on order, as were afloat : Think about that: Transport Demand would have to DOUBLE to absorb all the ships!

 

But it takes years for all those ships to be delivered by the shipyards, and they keep rolling out, even though rates are so low. People who talk about the BDI say they are saying something about Transport Demand, and that the low rates mean that demand is lower than it was years ago. It does not - Right now, the low BDI it is ALL ABOUT THE EXCESS SUPPLY OF SHIPS,

not transport Demand - check the figures, they will back me up.

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Tony C has admitted he got his latest bullish forecast on Freight rates wrong:

 

"In 2012 we thought we had identified a 13 year cycle in the shipping industry. Then in mid-2012 we published this report detailing the cycle and anticipating a rally in rates: https://caldaro.wordpress.com/2012/09/27/dry-bulk-shipping-industry/. The rally in rates did occur as the BDI more than tripled by late-2013. As a follow up to that we report we published an update in late-2013, which we got all wrong."

==

> https://caldaro.wordpress.com/2015/05/15/dry-bulk-shipping-update-2015/

 

Comments from his Blog:

Univ-Truth:

Too many ships were ordered in the Good old times.
And they will be with us for many years to come, even as new ones keep rolling out of the shipyards. The industry’s mistakes live longer than the brief enthusiasms

 

Tony C:

Agree, and many mismanaged and get rich quick shipping companies are folding. Lots of older ships are being scrapped this year. So worldwide tonnage is likely to contract. Still lots of rough seas out there as dry bulkers are barely getting by. But when demand comes in for Capesize the entire sector will take off. Until then …

 

Univ-Truth:

There’s also a strategic factor at play. China needs ships, and China builds ships. China has persuaded many shipowners from Greece and all over the world to build ships in its yards. If they have overbuilt, then that’s bad for the shipowners, but not so bad for China, who will benefit from cheap shipping cost. Did China willingly, and recklessly build too many ships? Maybe… Almost certainly.

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Too much supply.

In the peak, they ordered as many ships as there were afloat, and those ships are being delivered

 

This is good for China, which imports minerals and energy by bulk carriers

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"

The Baltic Dry Index, which measures the price of shipping the world’s major commodities, just touched an astonishing new low.

On Thursday it hit 504, less than half of what it was as recently as August.

On Friday it dropped below 500 for the first time ever.

The index has always been used as a bellwether indicator for global trade conditions and the state of the international economy, but it attracted special attention after it pointed to the coming financial crisis back in 2008."

 

It is nonsensical the way the BFI is being used - I have traded it, and spoken at shipping conferences about trading freight.

(After writing magazine articles and a book about shipping cycles, I had a global reputation about accurate forecasts for freight rates.)

 

This is a Supply versus Demand thing. And the problem is on the Supply side.

 

The way this worked was: a few years ago when freight rates were high, shipowners all around the world, went out and ordered massive amounts of ships. Cheap deals from chinese shipyards inspired even more orders. For some sizes of ships, the supply was contracted to nearly double,

 

It takes 3-6 years for those ships to be delivered, and now they are being delivered into a weaker market. This is not the first time this happened. It happened a few years ago with tankers, and the impact of the supply glut lasted for more than 10 years - ships are long-lifed assets.

 

The idiots who are taking this as a warning of a coming economic downturn may be right, but if they are, it will have nothing to do with a record low BDI - this is all about a record supply glut, not about a collapse in demand.

 

Put a fork in this idiocy... please !

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I agree completely - it's the same thing that we are seeing in many commodity markets - supply has been growing faster than demand.

 

I suspect that there is also another factor involved and that is a shift in the physical size of goods being transported. To use just one example, home computers are a lot smaller today on average (laptop v desktop) and therefore use less shipping capacity. There are a lot of other high value items which take up relatively little cargo space (smart phones, tablets) and some things that take up no space (digital downloads v dads/cds).

 

Short version: BDI might be highly relevant to ship owners but it doesn't say as much about the state or world trade.

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Ships have a long life - 20 years and more.

 

So this problem may persist

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