Posted on 11/20/2015 9:07:55 AM PST by SeekAndFind
I was absolutely stunned to learn that the Baltic Dry Shipping Index had plummeted to a new all-time record low of 504 at one point on Thursday. I have written a number of articles lately about the dramatic slowdown in global trade, but I didn’t realize that things had gotten quite this bad already. Not even during the darkest moments of the last financial crisis did the Baltic Dry Shipping Index drop this low. Something doesn’t seem to be adding up, because the mainstream media keeps telling us that the global economy is doing just fine. In fact, the Federal Reserve is so confident in our “economic recovery” that they are getting ready to raise interest rates. Of course the truth is that there is no “economic recovery” on the horizon. In fact, as I wrote about yesterday, there are signs all around us that are indicating that we are heading directly into another major economic crisis. This staggering decline of the Baltic Dry Shipping Index is just another confirmation of what is directly ahead of us.
Overall, the Baltic Dry Index is down more than 60 percent over the past 12 months. Global demand for shipping is absolutely collapsing, and yet very few “experts” seem alarmed by this. If you are not familiar with the Baltic Dry Shipping Index, the following is a pretty good definition from Investopedia…
A shipping and trade index created by the London-based Baltic Exchange that measures changes in the cost to transport raw materials such as metals, grains and fossil fuels by sea. The Baltic Exchange directly contacts shipping brokers to assess price levels for a given route, product to transport and time to delivery (speed).
The Baltic Dry Index is a composite of three sub-indexes that measure different sizes of dry bulk carriers (merchant ships) – Capesize, Supramax and Panamax. Multiple geographic routes are evaluated for each index to give depth to the index’s composite measurement.
It is also known as the “Dry Bulk Index”.
Much of the decline of the Baltic Dry Shipping Index is being blamed on China. The following comes from a Bloomberg report that was posted on Thursday…
The cost of shipping commodities fell to a record, amid signs that Chinese demand growth for iron ore and coal is slowing, hurting the industry's biggest source of cargoes.
The Baltic Dry Index, a measure of shipping rates for everything from coal to ore to grains, fell to 504 points on Thursday, the lowest data from the London-based Baltic Exchange going back to 1985. Among the causes of shipowners’ pain is slowing economic growth in China, which is translating into weakening demand for imported iron ore that’s used to make the steel.
So many of the exact same patterns that we witnessed back in 2008 are playing out once again in front of our very eyes. Below, I have shared a chart that was posted by Zero Hedge, and it shows how the Baltic Dry Shipping Index absolutely collapsed in 2008 as we headed into a major financial crisis. Well, now the Index is collapsing again, and it is already lower than it was at any point back in 2008…
The evidence continues to mount that we are steamrolling toward a deflationary economic slowdown that is worldwide in scope.
Just look at the price of U.S. oil. It just keeps on falling, and as I write this article it is sitting at $40.40.
The price of oil collapsed just before the financial crisis of 2008, and the same pattern is happening again.
And look at what is happening to commodities. The Thomson Reuters/CoreCommodity CRB Commodity Index has plummeted to the lowest level that we have seen since the last recession. It is now down more than 30 percent over the past 12 months, and it continues to fall.
So don’t be fooled by the temporary “stock market recovery” that we have witnessed. The underlying economic fundamentals continue to decline. We are entering a global deflationary recession, and the stock market will get the memo at some point just like we saw in 2008.
At this moment, global financial markets are teetering on the brink, and all it is going to take is some kind of major trigger event to send them tumbling over the edge.
And such an event may be coming sooner than you may think.
We live at a time when global terrorism is surging, relationships between nations are deteriorating and our planet is shaking in wild and unpredictable ways.
It wouldn’t take much to push the financial world into full-blown panic mode. A major regional war in the Middle East, a terror attack that kills thousands, or an earthquake or volcanic eruption that affects a large U.S. city are all potential examples of “black swan events” which could fit the bill.
The global financial system has never been more primed for another 2008-style crisis. Thanks to the fragility of the system, it could literally happen any day now.
So keep your eyes open – within weeks our world could be completely and totally different.
The Baltic Dry Shipping Index has been on my mind a lot lately.
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Another sign of a failed Presidency.
Of Interest?
or failed liberal ideology the world seems so eager to embrace?
Scrap yards are going to be busy. Anything over ten-fifteen years old will go under the torch. Lots of excess capacity out there.
I guess when one runs a website called “The Economic Collapse” there are certain expectations to be met in terms of content.
Here’s my beef: “Global demand for shipping is absolutely collapsing”.
Not true: lease rates on dry bulk carriers may be down, but that’s not the entire shipping market What’s the lease rate on tankers and what percent of the overall shipping market is that?
http://www.koenig-cie.de/en/content/vlcc-200000-320000-tdw
And if the price of oil is down (hardly grounds for an economic collapse to most consumers...), why are the VLCC — very large crude carrier— rates up. The price of the commodity they carry is down, but the daily lease rate is up. How can that be...it’s an economic collapse....
Sanity does not drive our current markets.
I was wondering about the Baltic Dry Shipping Index just yesterday. It came up in casual conversation at the dinner table... ;-)
Just one more thing to weigh on us today.
My 5:30 beer cant come soon enough.
5:30?
That’s not dependent on my time zone is it?
Hopefully that time zone isnt PST.
I dont think I could last having to wait until 9:30!
When I read Baltic Dry I remembered I’m out of Vodka.
a straight YOY comparison is not valid because it does not account for excess capacity in the form of Chinese ships manufactured with the same intelligence the squirrels that have built out their housing.
TEC? The Episcopal Church? Translantic Economic Council?
I read somewhere that at least part of the fall in BDI is due to a massive investment by China in container ships that are empty. So it may be a supply problem as well as a demand problem.
Some of the reports on the oil tankers state that many of the tankers are sitting for days/weeks waiting to be offloaded. China is supposedly at the highest reserve levels ever and simply has no additional storage space, hence the reason why tankers are not being unloaded. If true, tankers are still need to transport oil since the production levels have not decreased and ports of exit only have some much capacity to hold. Check out the following link: Oil glut deepens with 100m barrels at sea
Back in the beginning of the recession, many ships were essentially dry docked because the financing wasn't available to many of the shipping companies. Talk was that if a ship wasn't full and the profitable, it wasn't leaving; so they removed capacity. This time it seems that everyone has run out of answers and is just trying to make money before the shoe finally drops.
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