Baltic Dry Index
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wayneL
VIVA LA LIBERTAD, CARAJO!
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Re: International Index Trading
"If" T/A applies on an index like this, it's broken downwards from that triangle consolidation.
....with $BDI still taking a whopping.
"If" T/A applies on an index like this, it's broken downwards from that triangle consolidation.
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China’s statistics bureau said exports slid 23 percent in July from a year earlier, and the central bank reported that new loans plunged to less than a quarter of June’s level.
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Timmy
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Yep, lots of economic stats out of China yesterday. On balance (gross oversimplification coming up, read articles for fuller picture and DYOR) showing growth but a little below expectations, and lending fell sharply from June.
Reuters: China's economy takes a breather; recovery intact
BBC: China economy shows improvement
Bloomberg: China May Delay Monetary Tightening as Exports, New Loans Drop
Back on topic, BDI should be an indicator for global growth, appears very closely correlated with oil too. Useful part of the picture.
Reuters: China's economy takes a breather; recovery intact
BBC: China economy shows improvement
Bloomberg: China May Delay Monetary Tightening as Exports, New Loans Drop
Back on topic, BDI should be an indicator for global growth, appears very closely correlated with oil too. Useful part of the picture.
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Oh. Don't green shoots like sea water?
Oh. Only THOSE green shoots, huh? *Sea WEED*.
Hmmm...
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While studying the BDI for clues towards the future of world economy a few things should be considered:
The shipping market is very cyclical. Newer ships get built and the older ones get scrapped and of course, the shipping freight and time-charter rates adjust according to supply and demand. However, due to it's very nature, raising finance, ordering, building of ship's introduces a lag in the supply of ships. Over the last 100 years the same pattern gets repeated time and time again. In boom times, ships are ordered way in excess and that then leads to a bust and the story repeats itself. Greed and Fear I hear you say - of course!!
In the few years before the last bust in 2008, there was a frenzy of shipbuilding. Not just ship's were shipyards were ordered to build more bulk carriers in a hurry. Workers in the major shipbreaking yard like Alang were basically unemployed. Any old junkbucket that could float was pressed into service and attracted good hire rates. Bulk carrier hire rates went up by a 1000 percent. Just when the rate of new vessels from brand new shipyards hitting the water hit an all time high, the GFC came around. It was a perfect storm for dry shipping.
No surprise, the BDI dropped by 94% or thereabouts. Hundreds of ship's on order were cancelled. Shipyards went bankrupt and so did some very big names in the ship chartering community.
Now there is a long waiting time to have your ships scrapped!!!
The anchorages in places like Singapore are choking with ships just lying idle awaiting employment at breakeven rates.
The shorter term movements of the BDI are very susceptible to things like short term policy changes by the Chinese government, the Chinese stockpiles of ore or surge in thermal coal requirements in India. One of the major reasons for BDI spikes in 2007-2008 was the sudden decision by Chinese to raise their stockpiles of iron ore. This by itself would have an effect but what compounded it was the inadequacy of ports infrastructure. There were upto 150 ships waiting long periods of time at Newcastle and Haypoint to load coal and similarly there were large nos of ships waiting at Chinese ports to discharge iron ore. This takes a sizeable chunk of tonnage from active service and puts severe upward pressure on shipping freight and time-charter hire rates.
China has built many new deep ports and we are in the process of building new port infrastructure in Oz albeit, too little, too late and too slowly.
The shipping market is still depressed and who knows what tomorrow holds. Shipping is a derived demand and the dry bulk shipping is a good indicator of the world economy. With more and more old tonnage being scrapped, there would be a balance and the BDI would be that much more accurate in reflecting the actual state of world economy. In the meantime, the short term movements of the BDI should be only seen in the larger context.
Cheers
The shipping market is very cyclical. Newer ships get built and the older ones get scrapped and of course, the shipping freight and time-charter rates adjust according to supply and demand. However, due to it's very nature, raising finance, ordering, building of ship's introduces a lag in the supply of ships. Over the last 100 years the same pattern gets repeated time and time again. In boom times, ships are ordered way in excess and that then leads to a bust and the story repeats itself. Greed and Fear I hear you say - of course!!
In the few years before the last bust in 2008, there was a frenzy of shipbuilding. Not just ship's were shipyards were ordered to build more bulk carriers in a hurry. Workers in the major shipbreaking yard like Alang were basically unemployed. Any old junkbucket that could float was pressed into service and attracted good hire rates. Bulk carrier hire rates went up by a 1000 percent. Just when the rate of new vessels from brand new shipyards hitting the water hit an all time high, the GFC came around. It was a perfect storm for dry shipping.
No surprise, the BDI dropped by 94% or thereabouts. Hundreds of ship's on order were cancelled. Shipyards went bankrupt and so did some very big names in the ship chartering community.
Now there is a long waiting time to have your ships scrapped!!!
The anchorages in places like Singapore are choking with ships just lying idle awaiting employment at breakeven rates.
The shorter term movements of the BDI are very susceptible to things like short term policy changes by the Chinese government, the Chinese stockpiles of ore or surge in thermal coal requirements in India. One of the major reasons for BDI spikes in 2007-2008 was the sudden decision by Chinese to raise their stockpiles of iron ore. This by itself would have an effect but what compounded it was the inadequacy of ports infrastructure. There were upto 150 ships waiting long periods of time at Newcastle and Haypoint to load coal and similarly there were large nos of ships waiting at Chinese ports to discharge iron ore. This takes a sizeable chunk of tonnage from active service and puts severe upward pressure on shipping freight and time-charter hire rates.
China has built many new deep ports and we are in the process of building new port infrastructure in Oz albeit, too little, too late and too slowly.
The shipping market is still depressed and who knows what tomorrow holds. Shipping is a derived demand and the dry bulk shipping is a good indicator of the world economy. With more and more old tonnage being scrapped, there would be a balance and the BDI would be that much more accurate in reflecting the actual state of world economy. In the meantime, the short term movements of the BDI should be only seen in the larger context.
Cheers
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Excellent summary aarbee.
Just a question if you can provide some idea, but are the "holding costs" (ie the cost of waiting for a ship to be scrapped) exhorbanent? If they are high, surely there is a economical way to put excess shipping to use for bulk storage, scuttled to protect vulnerable coastlines, or some other purpose?
Just a question if you can provide some idea, but are the "holding costs" (ie the cost of waiting for a ship to be scrapped) exhorbanent? If they are high, surely there is a economical way to put excess shipping to use for bulk storage, scuttled to protect vulnerable coastlines, or some other purpose?
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Well once the shipowner has decided to scrap the ship, it is sold to the buyer at scrap value and delivered to him at the scrapyard. The buyer's loss during waiting is basically the cost of his funds tied up for the duration of waiting period. The ship's machinery etc is salvaged and has some residual value. I don't think the ship can be used for other purposes you outlined especially with unclean bunker tanks.
As for bulk storage, in the very early eighties the oil market had crashed and during the worst period, a lot of tankers were used for storage but there were others including a few brand new tankers which ended being scrapped because even the layup costs were too high. Those were crazy times for the tanker market. The dry bulk market is nowhere close to that situation.
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Timmy
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This is great stuff thanks aarbee.
Timmy
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Just updating this thread, chart attached of the BDI. Strongly coming off the late Sept. lows. Sign of confidence in global recovery?
Source of this chart is Stockcharts
http://stockcharts.com/charts/
and more at
http://www.investmenttools.com/futures/bdi_baltic_dry_index.htm
(Thanks for link Edwood)
Source of this chart is Stockcharts
http://stockcharts.com/charts/
and more at
http://www.investmenttools.com/futures/bdi_baltic_dry_index.htm
(Thanks for link Edwood)
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Lucky_Country
Formerly known as ijh
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The BDI chart looking alot healthie lately and with Australian Resources a centrepiece of its activity one must think the good times are not far off.
The US and UK are a drag but slowly improving whereas China is surging ahead and kickstarting the global economey.
The US and UK are a drag but slowly improving whereas China is surging ahead and kickstarting the global economey.
Timmy
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wayneL
VIVA LA LIBERTAD, CARAJO!
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The old triple nipple formation, this is never a good sign.
Cheers
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Garpal Gumnut
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It's now at its lowest level in 14 months.
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http://www.zerohedge.com/article/ba...secutive-loss-6-years-refutes-australian-opti
So much for the trade surplus recently reported eh?
This is why I am betting on the AUD to fall further. With the Chinese mills are now reporting to be destocking steel inventories and lowering production, how much more "lucky" can this country gets?
I'm always surprised at how uninformed most people are in regards to the recent massive over stockpiling of resources by the Chinese has on the Australian economy. They haven't heard stories about pig farmers speculating on copper prices by stock pilling them in their own warehouses?
Baltic Dry Index Dropping 4%, Posting Longest Consecutive Loss In 6 Years, Refutes Australian Optimism
Submitted by Tyler Durden on 07/06/2010 08:43 -0500
Baltic Dry Real estate
The biggest reason for the runup in the JPYAUD and its immediate secondary carry derivative, the stock market, was the earlier announcement out of the RBA claiming all is clear, there is no bubble in China, there is no bubble in OZ real estate, and all the other usual talking points one would expect out of a central bank whose future is inextricably linked to the endless commodity stocking in China. And indeed, one glance at the far more neutral indicator of the Baltic Dry index paints a far more dire picture: the BDIY plunged 4% overnight to 2,127, posting the longest consecutive decline in 6 years at 28 days. Despite the optimism from the conflicted money printers, those whose livelihood actually depends on a ceaseless influx of goods into China and broader commodity trading in general, are not nearly quite so happy, having seen a drop in their margins by almost 50% in just over a month.
So much for the trade surplus recently reported eh?
This is why I am betting on the AUD to fall further. With the Chinese mills are now reporting to be destocking steel inventories and lowering production, how much more "lucky" can this country gets?
I'm always surprised at how uninformed most people are in regards to the recent massive over stockpiling of resources by the Chinese has on the Australian economy. They haven't heard stories about pig farmers speculating on copper prices by stock pilling them in their own warehouses?
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nulla nulla
Positive Expectancy
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could be worse.
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You'd never know that a key marine freight index was plunging by looking at Asian shipping shares' year-to-date performances, and some analysts remain upbeat on freight rates in the long term.
Most Asian shipping shares extended their gains Thursday, as broader markets rallied in the wake of a strong advance on Wall Street.
But the Baltic Dry Index, which tracks sea freight rates to ship dry commodities, fell for the 30th straight day through Wednesday to its lowest level since May 2009. According to the Baltic Exchange, which compiles the index, the BDI fell 5.1% to 2,018 points --down to less than half of its May 26 peak of 4,209.
"It is the longest decline in six years," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman. "The main driver seems to be concerns about the cooling of China's steel sector. Steel is the biggest user of iron ore. Iron ore and coking coal account for more than a third of the Baltic dry freight."
Economists still view the index as a barometer of global productivity trends, but "it appears there are some growing concerns about its usefulness today versus its usefulness, say, two years ago. And it's all down to shipping supply," Izabella Kaminska at FT Alphaville wrote on Wednesday.
TAL International is seen as attractively valued and leveraged to a recovery.
Freight rates could remain low in the third quarter, "as steel mills shut for maintenance, grain shipping ends and concerns over China's falling import demand looms," said J.P Morgan shipping analyst Corrine Png in a research report this week.
"However, we do not expect freight rates to collapse to distress levels [seen] in late 2008, which was exacerbated by trade-finance issues," she said. "The container shipping experience in the past 1.5 years has taught us that pricing at marginal cost is unsustainable, as vessels start getting laid up before long."
As the industry continues to take delivery of new vessels, "this will lend support to longer-term freight rates," she said.
http://www.marketwatch.com/story/asia-shipping-shares-belie-baltic-dry-index-drop-2010-07-07
Most Asian shipping shares extended their gains Thursday, as broader markets rallied in the wake of a strong advance on Wall Street.
But the Baltic Dry Index, which tracks sea freight rates to ship dry commodities, fell for the 30th straight day through Wednesday to its lowest level since May 2009. According to the Baltic Exchange, which compiles the index, the BDI fell 5.1% to 2,018 points --down to less than half of its May 26 peak of 4,209.
"It is the longest decline in six years," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman. "The main driver seems to be concerns about the cooling of China's steel sector. Steel is the biggest user of iron ore. Iron ore and coking coal account for more than a third of the Baltic dry freight."
Economists still view the index as a barometer of global productivity trends, but "it appears there are some growing concerns about its usefulness today versus its usefulness, say, two years ago. And it's all down to shipping supply," Izabella Kaminska at FT Alphaville wrote on Wednesday.
TAL International is seen as attractively valued and leveraged to a recovery.
Freight rates could remain low in the third quarter, "as steel mills shut for maintenance, grain shipping ends and concerns over China's falling import demand looms," said J.P Morgan shipping analyst Corrine Png in a research report this week.
"However, we do not expect freight rates to collapse to distress levels [seen] in late 2008, which was exacerbated by trade-finance issues," she said. "The container shipping experience in the past 1.5 years has taught us that pricing at marginal cost is unsustainable, as vessels start getting laid up before long."
As the industry continues to take delivery of new vessels, "this will lend support to longer-term freight rates," she said.
http://www.marketwatch.com/story/asia-shipping-shares-belie-baltic-dry-index-drop-2010-07-07