Aug 02

maersk 2

Something Just Snapped: Container Freight Rates From Asia To Europe Crash 23% In One Week (ZeroHedge, Aug 2, 2015):

One of the few silver linings surrounding the hard-landing Chinese economy in recent weeks has been the surprising resilience and strength of the Baltic Dry Index: even as Chinese commodity demand has cratered in 2015, this “index” has more than doubled in the past few months from all time lows, and at last check was hovering just over 1,100.

bdiy

Many were wondering how it was possible that with accelerating deterioration across all Chinese asset classes, not to mention the bursting of various asset bubbles, could global shippers demand increasingly higher freight rates, an indication of either a tight transportation market or a jump in commodity demand, neither of which seemed credible.

We may have the answer.

It appears that the recent spike in shipping rates was analogous to the dead cat bounce in crude oil prices: a speculator-driven anticipation for a sustainable rebound that never took place. And now, just like with crude prices, it is all crashing down…. again.

According to Reuters, shipping freight rates for transporting containers from ports in Asia to Northern Europe dropped 22.8 per cent to $400 per 20-foot container (TEU) in the week ended last Friday, data from the Shanghai Containerized Freight Index showed.

maersk 2

Freight rates on the world’s busiest shipping route have tanked this year due to overcapacity in available vessels and sluggish demand for transported goods. Rates generally deemed profitable for shipping companies on the route are at about US$800-US$1,000 per TEU. In other words, at current prices shippers are losing half a dollar on every booked contractual dollar at current rates.

According to Shanghai data, it was the third consecutive week of falling freight rates on the world’s busiest route. Container freight rates have so far increased in 5 weeks this year but fallen in 23 weeks.

In the week to Friday, container freight rates fell 24 percent from Asia to ports in the Mediterranean, fell 4.4 per cent to ports on the US West Coast and were down 3.7 per cent to ports on the US East Coast.

Maersk Line, the global market leader with more than 600 vessels and part of Danish oil and shipping group AP Moller-Maersk, was one of the few container shipping companies to make a profit last year. The company controls around one fifth of all transported containers from Asia to Europe.

Should the dead cat bounce in shipping rates indeed be over, and if the accelerate slide continues at the current pace, not only will shippers mothball key transit lanes, but the biggest concern for global economy, the unprecedented slowdown in world trade volumes, which we flagged a week ago, will be not only confirmed but is likely to unleash yet another global recession.

20150723_USRECESSION

Unless, of course, central planners learn how to print trade and quite soon at that…

 

 

Tags: , , , , , ,

3 Responses to “Something Just Snapped: Container Freight Rates From Asia To Europe Crash 23% In One Week”

  1. squodgy Says:

    OK, so, if we accept the fact that global demand has been bumping along at the bottom since 2001, and has just now got even worse, then logically, the supply of all commodities from electronics to harvested food crops, to oil to durables and consumables is set to become short.
    Economics has always been an inexact science, but the most basic rule, is exact. The Law of Supply & Demand still applies.
    Assuming a constant population, and taking into account priority changes to meet circumstances, core demand will still apply.
    So, demand is relatively constant, but supply slows.
    That can only lead to inflation, which can only lead to more prioritising and adjustment, until the peasants show unrest.
    So, Venezuela & Greece are only the canaries in the mine.

  2. john Says:

    My wife and I just yesterday decided to make this the event we will prepare for. This seem to encompass all issues that might come along. Then I saw this today, which comes to the same conclusions. Short term food and long term planting supplies. Water, first aid, keeping some electronic things in a Faraday cage, have a defensible plan for the house. I think the first few weeks will be the hardest, A lot of good people will die because they did not prepare.

    http://www.shtfplan.com/headline-news/homeland-security-idle-on-2008-emp-threat-govt-dysfunction-preventing-protecting-ourselves_08032015

  3. Marilyn Gjerdrum Says:

    Demand will keep some shipping gong, but need demand is far different that the one they have relied upon………..the drive to spend and consume.

    It is easy to do so when one has a job that pays the bills every two weeks. But, when given a job providing long hours and poor pay, people have to curtail their spending…..and this story tells volumes. People only buy what they have to; not how much they might want…..For years, Americans and Europeans could afford to spend on items that looked appealing, not always necessary. Now, with the incredible raise in food and shelter prices, they have to save the money by spending less.

    Did the fools who produced all this stuff really think it would go on forever?
    Nothing goes on forever……at some point, people hit the saturation point, either financially or due to lack of space. People who can afford it might continue to consume and produce, but it is unlikely they are going to do it forever.

    This is what is happening all over the world. The excessive consumption upon which we based our world economy is over. People buy what they need, not just the latest toy…….and this is where greedy guts are already losing……..I can have a free smart phone for $25.00 a month…………..why?

    I have a cell phone to call people if I need to contact someone. I have always carried a cell phone since the advent of the flip phone in 1994-95……It was great to have the ability to call people when stuck in traffic, ETC…..Now, that is illegal unless you build it into your car. What the hell is the difference?

    People have found cheaper ways to use what they want, and to forget the stuff they do not…….Also, the cost of food and shelter has risen radically…….A hungry populace isn’t a happy one.

    Whoever got the cheap food law repealed needs to be hunted down……a hungry people will revolt. Hunger is the great motivator, even of the ignorant and lazy…….

Leave a Reply