Heard of the Baltic Dry Index? Analysts warn 70% crash of key world trade barometer...

The Daily Mail ^ | 1-16-16 | Hugo Duncan

[444Flyer]

"A key barometer of world trade has crashed to a record low in a worrying sign the global economy is grinding to a halt.

The so-called Baltic Dry Index, which measures the cost of shipping raw materials such as coal, iron ore and grain, has fallen nearly 70 per cent since August to its lowest level since its introduction in 1985.

The slump – which analysts said showed 'global trade is really suffering' as the outlook worldwide darkens – fuelled fears that the economy is heading for the rocks.

It came on another bruising day for investors as worries about China and the rest of the world sent the price of shares, oil and other commodities sharply lower.

[Mouton]

I recall that recession well. Interesting the interest rates soared near to 18% on some non installment debt, in fact, I purchased a home in early 80 with a 13% mortgage rate. In 82, zero coupon treasury were yielding almost 10%, IOW, $180 invested paid 1000 in 2005.

On the other side, today we have zero interest rates and an economy in actual recession albeit the numbers put forth by the government show it is not. It is definitely in deflation mode. Which is worse, inflation or deflation? Well, during inflation I had a good paying job. During deflation I don’t.

[Paine in the Neck]

One would also have to take into consideration the fleet capacity over time.

Well, yes. As always, price is the result of the interplay of supply and demand. Too many ships will drive BDI down as well. Fundamentally, we have more bottoms than the quantity of goods being shipped requires.

The older fleet will be scrapped. Contracts for new builds will slow. The fleet will shrink. If demand for bulk goods doesn't further contract (big if) then BDI will rise as the fleet shrinks.

[Reverend Wright]

Commodity price index is now below its 2009 low
http://edge.alluremedia.com.au/uploads/businessinsider/2015/08/CRB-commodity-price-index.jpg

note: current crb is 160

Obama has done it again: he said ISIS was JV, and they conquered half of Iraq; he said ISIS was contained and they killed 130 in Paris; then he said there was no known threat to the homeland, and we got San Bernardino...

and just this week he said the economy is great...

[Paladin2]

I have no idea of ship operating costs so don’t know what fraction of marginal operating cost is fuel related, but as oil has dropped there must be some impact on operating costs that could flow into the BDI.

[Hot Tabasco]

BDI is telling us there is no demand.

Yea, I read an article this past couple weeks that showed ocean freighters sitting in their respective ports because nothing's being shipped.......

[gattaca]

bump

[Paine in the Neck]

I have no idea of ship operating costs so don’t know what fraction of marginal operating cost is fuel related, but as oil has dropped there must be some impact on operating costs that could flow into the BDI.

That's true, but it is a second-order effect. The lack of demand for the goods covered by BDI (raw materials) dominates. Same with trucking rates. If no one wants the goods carried then no one wants the trucks, even if they can run more cheaply on lower priced fuel.

[unixfox]

What’s the big deal?

Just raise taxes a little more. That solves everything.

[jim_trent]

> “I recall that recession well.”

So do I. The “misery index” at the time (the sum of the inflation rate, the prime interest rate, and the unemployment rate — all measures of hurt) was about 45%. When Obama came in saying that he inherited the worst economy EVER, the misery index was about 15%. BS.

[Oatka]

One would also have to take into consideration the fleet capacity over time.
Some have said that many expected China to continue at its prior growth rate and were installing transportation infrastructure to support same. Now much of it is now overbuilt.

Baltic Dry Index’s Beating Continues (A maritime site).

From the above site: "(The) fundamental problem is not fleet growth but negative demand growth. Slowing economic growth and significant turmoil in commodity prices is resulting in extremely low chartering activity," said Clarksons Platou analyst Frode Morkedal."

[PIF]

The point is the costs have gone down so far there is no longer any profit, plus there is nothing to ship with no demand - remember even in the best of times in the past 30 years most containers arriving in the US go back empty ... if at all.

[PIF]

From gCaptain - a better source for shipping info:
Hope Fades for Dry Bulk Recovery as Baltic Index Crashes Below 400 Points

The dry bulk shipping downturn began in 2008, after the onset of the financial crisis, and has worsened significantly in recent months as the Chinese economy has slowed, meaning less appetite for iron ore and coal.

The capesize index, shed 21 points, or 7.89 percent, to 245 points on Wednesday. Average daily earnings for capesizes dropped $160 to a record low of $3,101.

Capesizes typically transport 150,000-tonne cargoes such as iron ore and coal and have been particularly affected by a fall-off in coal demand from China.

Coincidentally, this slide began after Obama took office ...

[The Duke]

It’s almost as if there’s some sort of “malaise” ...

[Leo Carpathian]

What’s the big deal? Just raise taxes a little more. That solves everything.

....aaaaand minimum wage to $20, ...aaaand you can keep your doctor, ...aaaand nationalize the properties and businesses from the rich.... free everything - vote for Bernie

Looks like when US sneezes, EU and world catches cold.

Where are all those economists trumpeting that EU is the shining model for economy and prosperity???

I hope that 'Ronald' Trump really makes America Great Again!

[dfwgator]

Just raise taxes a little more. That solves everything.

......and the band played on.....

[sunrise_sunset]

-“The so-called Baltic Dry Index, which measures the cost of shipping raw materials such as coal, iron ore and grain,”

Mmkay, so if the cost of shipping has gone down, along with the cost of energy isn’t this a good thing for economies, lower the cost of manufacturing?-

It means there is zero demand, which means the world economy is in a death spiral.

[Paladin2]

Thanks.

Apparently the BDI is a leading indicator, and it indeed looks bad.

[twoputt]

It’s almost as if there’s some sort of “malaise” ...

---

We’ll know we hit that spot when Barry does a fireplace chat wearing a cardigan sweater and blaming the American people.

[444Flyer]

“What's the big deal?

Just raise taxes a little more. That solves everything.”
_______________________________________________________

Just received the first paycheck stub of 2016. Health insurance went up about %17...little hidden Obamacare tax in there. GRRRRRRR...

The Obamacare hidden tax means less money in the budget to spend in the economy. Which all is connected in with the BDI.

So the dolts that wanted it may get their taxpayer funded medical insurance, but they'll loose their job and livelihood. Genius!

[444Flyer]

Very educational. Thanks all!