Baltic Dry Index

I have a theory that the prices are also being inflated to some extent by the Chinese banning Australian coal.

1, there have been some ships full of coal sitting idle, waiting to unload, this ties up some of the supply.

2, China is now importing more coal from USA instead of Australia, which again ties up more ships, because the round trip to the USA takes a lot more time, so each 1 shipment delivered from the USA ties up a ship for 2.5 times as long as a shipment delivered from Australia.

if China begins importing coal from Australia again, we might see more supply of bulk carriers becoming available, as each load requires less sea days.

both Mongolia and North Korea have coal deposits however there are some hurdles to huge amounts from each source , and given time and incentive those hurdles might be overcome ( say ignoring sanctions on North Korean exports , and improving logistics in Mongolia )

i hold Australian coal producers ( WHC , NHC , S32 and BHP ) but suspect this coal-boom to be short-lived , simply because Australia has let become the meat in the sandwich in a global power-struggle and China will veer toward diversity in suppliers

The BDI index has come down from its highs of 5650 early this month and is sitting at 3808 today.
Still 300 % above the lows back in December last year.
Bit it could be more of a case that there are just so few ships available.
There is a still a massive backlog of goods.
The ports Authority in LA are going to start charging for containers left in storage for more than 9 days.
From San pedro ports Authority

In an effort to improve cargo movement amid congestion and record volume, the ports of Long Beach and Los Angeles will begin assessing a surcharge to ocean carriers for import containers that dwell on marine terminals.

Under the new policy, the ports will charge ocean carriers for each container that falls into one of two categories. In the case of containers scheduled to move by truck, ocean carriers will be charged for every container dwelling nine days or more. For containers moving by rail, ocean carriers will be charged if the container has dwelled for six days or more.

Beginning Nov. 1, the ports will charge ocean carriers with cargo in those two categories $100 per container, increasing in $100 increments per container per day.

“We must expedite the movement of cargo through the ports to work down the number of ships at anchor,” said Port of Los Angeles Executive Director Gene Seroka. “Approximately 40% of the containers on our terminals today fall into the two categories. If we can clear this idling cargo, we’ll have much more space on our terminals to accept empties, handle exports, and improve fluidity for the wide range of cargo owners who utilize our ports.”

“With the escalating backlog of ships off the coast, we must take immediate action to prompt the rapid removal of containers from our marine terminals,” said Port of Long Beach Executive Director Mario Cordero. “The terminals are running out of space, and this will make room for the containers sitting on those ships at anchor.”

Click to expand...

So many ships at anchor in the San Fran bay that the backlog could take months rather than weeks to eliminate.
And its only going to get worse.
from Freightwaves

American Shipper is reporting another wrinkle facing the Port of Los Angeles as it tries to clear the massive congestion. Thousands of additional empty containers are en route to the Port of Los Angeles from East Coast and Gulf Coast ports.

Over the last couple of weeks, up to 2,000 empty containers originating from the ports of Charleston, South Carolina; Savannah, Georgia; New Orleans and Houston were headed to the Port of Los Angeles to be loaded onto vessels. These containers were requested by the carriers and will create more burden for the port terminals to receive local trucks trying to unload their own empty containers.

“The biggest hurdle we see in the market is the inability to return empty containers,” said Weston LaBar, head of strategy at Cargomatic. “This congests our carrier and customer yards and adds to the chassis shortage. Ultimately this can delay the ability to pick up imports due to the shortage in chassis availability and yard space.

“We have customers whose warehouses can receive goods; however, the lack of chassis and space in their yards due to the stranded empties impacts the ability to keep a delivery cadence.”

The phenomenon of containers traveling from other ports to Los Angeles is not a new one. Local truckers tell American Shipper the port is known to be the “empty container dumping ground in the country.”

“Even containers from Port Rupert [in British Columbia, Canada] have made their way down to Los Angeles via rail,” said one trucker who requested anonymity. “This is making a bad situation worse. There is a finite number of slots to return empties. How can we pick up empties if we can’t unload our chassis?”

Click to expand...

So the greight companies cannot pickup if they in turn cannot unload empty containers.
And now we have palletgate.
A worldwide shortage of pallets is adding to the woes.
Fromtodays OZ

Coles boss Steven Cain has labelled the global shortage of wooden pallets used by suppliers around the world to ship their goods as “pallet gate” and revealed a task force has been assembled by retailers and suppliers in Australia to work on the growing challenge.
Supermarkets including Coles and Woolworths along with the Australian Food and Grocery Council, the peak body for the nation’s food, as well as grocery and supermarket manufacturers, have formed the pallets task force to help address the pallets shortage that is threatening the smooth running of the supply chain for not only food but other non-food products.

“Across the nation there is a bit of a pallet gate going on at the moment,” Mr Cain said.
The shortage and higher price of wood, labour shortages, some retailers sitting on pallets through lockdowns and huge disruptions to global supply chains have all conspired to create a shortage of pallets.

Click to expand...

Can only get messier.
Mick

• Twelve months ago it cost $15,000 to send a 12-metre container from Australia to China. This was now $6,000, which is still much higher than pre-COVID costs of about $2,000.
• Previously cost up to $US20,000 [$31,894] to send a 12-metre container from China to the United States. This had fallen to $US3,000 or $US4,000,

Dona Ferentes said:

• Twelve months ago it cost $15,000 to send a 12-metre container from Australia to China. This was now $6,000, which is still much higher than pre-COVID costs of about $2,000.
• Previously cost up to $US20,000 [$31,894] to send a 12-metre container from China to the United States. This had fallen to $US3,000 or $US4,000,

Global shipping costs falling at rates not seen 'in decades' in lead up to Christmas

Extra capacity in global sea freight due to rising interest rates across the world is reducing costs for exporters, enabling them to access markets lost due to major price hikes during the pandemic.

www.abc.net.au

Click to expand...

It was insane. It was about $18000 from Australia. It's still pretty high considering.

This time last year I wrote about the BDI having gone down to over 3000.
Today it sits at 1700, about the same level as what it was in 1993, although it has recovered from its most recent lows.
According to Goldman Sachs via Zerohedge'

Since global shipping peaked during the Covid pandemic, A.P. Moller-Maersk has warned about an emerging downturn in the container shipping market.

Goldman now forecasts a lengthier and potentially more severe downturn for the shipping industry, recommending a sell for the Danish shipping giant:

"We believe market expectations are still too complacent on the depth and duration of the coming shipping recession," Goldman analyst Patrick Creuset told clients Monday morning.
Creuset said his fundamental perspective on the industry is that freight rates and earnings must continue to decline. This reduction is necessary until there's enough financial pressure to phase out expensive tonnage.

He said, "Even after the further rate drop in recent weeks, we see no sign of this: New vessel deliveries are running at c.1% of the global fleet/month with very little slippage, idling and scrapping remain low, and Nov active capacity is set to increase significantly vs. Oct on the main trades."

Creuset identified two major distinctions compared with previous bear markets, which might result in a steeper drop in EBIT margin than typically observed:

1. Industry balance sheets used to be highly levered meaning cash burn could not be sustained for long, whereas this time most carriers hold billions of USD in cash;
2. The erosion of the alliance structures means carriers are incentivized to make sure their network is large and strong enough to potentially sustain services on their own, e.g. MSC's strong growth on the back of the announcement of the 2M split. Point (2) is also likely to make the day-to-day management of overcapacity a lot harder in 2024/25.

Goldman hit Maersk with a sell rating, expecting "2023-27 EBITDA estimates fall by 8% on average, reflecting lower freight rates."

Click to expand...

Container rates on major shipping lines have roundtripped back to pre-Covid levels.

Click to expand...

In August, Maersk warned about waning global demand for shipping containers by sea. The company transports Chinese-made goods for retailers such as Walmart, Nordstrom, Macy's, and Kohl's - all of whom have warned about a consumer slowdown.
Goldman's report offers even more evidence the global economy is on shaky grounds as the Western consumer appears to be sputtering amidst central banks' aggressive rate hiking cycle to tame the worst inflation in a generation.


Mick

Container ship traffic, 04 Jan, two weeks after the Houthi started making the Red Sea a hot zone.

Dona Ferentes said:

Container ship traffic, 04 Jan, two weeks after the Houthi started making the Red Sea a hot zone.
View attachment 168279

Click to expand...

not de-stabilized , yet

wait and see if Egypt suffers regime change

then stuff will be hitting the fan

but they did try an Arab Spring version 2 , they are reaping what they have sown ( and China will collect a lovely bonus via their rail-link aspirations )

Dona Ferentes said:

Container ship traffic, 04 Jan, two weeks after the Houthi started making the Red Sea a hot zone.

Click to expand...

and


.
(still lower than Covid peak)

I guess a few of those ships that were dry docked due to low prices are now getting wet again, asap.

As this has morphed into the de facto shipping thread / channel.

The challenges of container shipping in the current global environment​

By Peter Milios | More Articles by Peter Milios

Container shipping and the web of global transport services linked to it are entering the usual peak season for demand, but this year's scenario planning includes many questions about supply.

Red Sea vessel diversions and port congestion have absorbed the industry's excess capacity from the end of 2023 when Houthi attacks intensified. Spot container rates have doubled since early May.

In Singapore, the world’s second-busiest port and a key transfer hub for cargo between Asia and the West, delayed shipments jumped 44% in May from a year earlier and were up 27% year-over-year through June 25th, according to data from FourKites, a supply chain visibility platform.
“The lack of available empty shipping containers in key export markets is an ongoing concern,” said Mike DeAngelis, head of international ocean solutions at FourKites. “Containers are getting caught up in a global mix of delays.”

Adding to the bottlenecks is a demand reflex honed during the pandemic: the fear of missing out. Looming US tariffs on Chinese imports and a potential late-summer strike at East and Gulf Coast ports are boosting orders sooner than usual. Judah Levine, head of research at cargo-booking platform Freightos, advises planning for another couple of months of strains.

Levine predicts that spot container rates to Europe and the US from Asia might reach $10,000 per 40-foot equivalent unit in the coming months, up from the current $7,000 to $8,000. While it would take a confluence of other disruptive worst-case factors for rates to return to pandemic highs of $15,000 to $20,000, it’s not impossible, he said.
“To me, the most likely scenario is that we’re going to see a couple of months with a lot of pressure .” “We may even get to those levels of $15,000 per container, but during the pandemic, we had months and months of that. This time, I think we could have some months but not many.”

Here’s a rundown of Levine’s scenarios for the second half of the year:
Worst Case: Ships continue avoiding the Red Sea, early peak-season demand remains solid, and port congestion lingers for months, extending global disruptions past Chinese Lunar New Year in late January. Adding a strike by dockworkers on the US East and Gulf Coast would push container rates to record highs set during the pandemic.
Best Case: Houthi attacks in the Red Sea cease, allowing carriers to return to optimal sailing schedules. After a few months of adjustments, cargo rates drop sharply as supply outpaces demand. Newly built ships coming into service would help push the cost for a 40-foot container back to pre-pandemic levels around $1,000 between Asia and the US and Europe.
Most Likely Case: Current demand strength softens, indicating that early orders were pulled forward from the third and fourth quarters due to looming US tariffs on Chinese imports, Red Sea delays, port strike worries, or a mix of all three. Spot rates might peak around $10,000 per 40-foot container this month and next, but they would decrease later in the year.

an allied issue is freight rates in general and supply lines getting squeezed through centralizing of ports (scale matters). These 3 quotes highlight some cost-pressure issues

As with so many macro events, the flow on affects are not immediate, but are to be included down the track.
I have no doubt that transport costs are going to keep increasing for some time, even if the issues that cause them are resolved.
Lagging.
Its a great word.
Mick

mullokintyre said:

As with so many macro events, the flow on affects are no immediate, but are to be included down the track.
I have no doubt that transport costs are going to keep increasiing for some time, even if the issues that cause them are resolved.
Lagging.
Its a great word.
Mick

Click to expand...

With a lag indeed..
As you remember, the price of shipping containers after covid went thru the roof, i mean the ones leaving the port and used as storage on farms, trendy small house buildings etc
But i was able to purchase last month a 20ft shipping container in decent shape.no rot or leak for 2.4k aud delivered..a price much lower than it was a year ago.
Looking at the current Baltic index, it was probably good timing...so currently, the containers themselves are still cheap in Australia while in high demand in Asia.
Could also be a sign of our importing mostly status as a nation and of lower purchasing power of the lowly class of peons like me, living in rural properties or needing shed storage.
Anyway wanted to share and see if this add up to the debate

I went down Port Botany Road yesterday (to Matraville cemetary) and was amazed at the scale of things. I haven't been that way for decades, and how it has grown.

Trucks clog the access roads, the cranes seem huge and containers are stacked 10 high in places. About half a billion has been spent doubling the railfreight tracks to the western suburbs, to Chullora and Moorebank intermodal. Whether this solves the traffic management on the roads is another matter as it is intimidating in a passenger car amongst the big rigs.

Peter Zeihan's prediction from his book "The End of the World Is Just the Beginning: Mapping the Collapse of Globalization" (2022).

His thoughts are the following: “Days of long-haul shipping are, by and large, numbered. No country in the world, with the exception of Japan and the United States, can send navies to neighboring continents and patrol large enough areas of ocean to ensure that merchant ships can safely pass through them. The peace order worked because only the U.S. had a global fleet and all countries agreed not to touch the ships. That peace no longer exists.”

“Paradoxically, but the fact is that in a disintegrating world, the most important ships will be the quietest ships - all those boring bulk carriers. After all, if container shipping suffers, most of the world's economies will stand up because of the collapse of production. But if bulk carriers carrying food and fuel stop sailing, huge numbers of people will go hungry.”

“Inter-bloc conflicts over maritime transportation will become the new normal. However, it should not be forgotten that most countries have no long-haul fleet, which means the real fun will begin on no man's land, controlled by no bloc, in areas where ships will have no one to call for help. In such an environment, carriers will face three safety challenges. The first and most obvious problem is the problem of piracy. Any area not protected by a strong enough fleet will be vulnerable to attacks by pirates like the Somali pirates.”

“The next generation of ships will have much in common with their much smaller predecessors used before 1945. They will not be able to travel the same distances as today's ships, their cargo capacity will be lower - not only because their size will be smaller, but also because they will require more fuel per unit of cargo so they can go faster. In addition, their design will have to allow cargo to be stored off-deck. Eventually, if pirates or privateers can identify the type of ship from afar, it will be easier to capture. This alone would reduce a ship's cargo capacity by two-thirds. The world's production chains tied to transoceanic cargo transportation will have to say goodbye”.

Dona Ferentes said:

Peter Zeihan's prediction from his book "The End of the World Is Just the Beginning: Mapping the Collapse of Globalization" (2022).

His thoughts are the following: “Days of long-haul shipping are, by and large, numbered. No country in the world, with the exception of Japan and the United States, can send navies to neighboring continents and patrol large enough areas of ocean to ensure that merchant ships can safely pass through them. The peace order worked because only the U.S. had a global fleet and all countries agreed not to touch the ships. That peace no longer exists.”

“Paradoxically, but the fact is that in a disintegrating world, the most important ships will be the quietest ships - all those boring bulk carriers. After all, if container shipping suffers, most of the world's economies will stand up because of the collapse of production. But if bulk carriers carrying food and fuel stop sailing, huge numbers of people will go hungry.”

“Inter-bloc conflicts over maritime transportation will become the new normal. However, it should not be forgotten that most countries have no long-haul fleet, which means the real fun will begin on no man's land, controlled by no bloc, in areas where ships will have no one to call for help. In such an environment, carriers will face three safety challenges. The first and most obvious problem is the problem of piracy. Any area not protected by a strong enough fleet will be vulnerable to attacks by pirates like the Somali pirates.”

“The next generation of ships will have much in common with their much smaller predecessors used before 1945. They will not be able to travel the same distances as today's ships, their cargo capacity will be lower - not only because their size will be smaller, but also because they will require more fuel per unit of cargo so they can go faster. In addition, their design will have to allow cargo to be stored off-deck. Eventually, if pirates or privateers can identify the type of ship from afar, it will be easier to capture. This alone would reduce a ship's cargo capacity by two-thirds. The world's production chains tied to transoceanic cargo transportation will have to say goodbye”.

Click to expand...

Thanks @Dona Ferentes

A good book by Peter Zeihan. Well worth a read if you are interested in geopolitics and demography as an aid to investing and what the future may look like.

gg

Interesting find!

as they say, there are now only two types of ocean going vessels: submarines and targets.