China's COSCO Dis-Assembles 8 Ships Amid Glut As Baltic Dry Hits Another Record Low

Zero Hedge ^ | 2-16-2015 | Tyler Durden

[blam]

Tyler Durden
02/16/2015

You know things are bad in the ship-building business when... amid considerably larger than expected losses, China's COSCO announced that it has dis-assembled 8 vessels in January alone (including 3 bulk carriers) and will be decommissioning and disposing of them as it awaits a "more conducive" environment. It appears that is not coming anytime soon, as The Baltic Dry Index just hit 522 - a new all-time low (down a stunning 53 of the last 55 days).

As COSCO explains in its HKSE Statement:

(snip)

[blam]

There was a time when the BDI was used as an indicator of future economic activity.

[blam]

Same with Dr Copper

[ProtectOurFreedom]

How can it possibly be cheaper to scrap perfectly good ships, sell the scrap, melt into new steel and make new products, then buy new ships five or ten years down the line rather than mothball them for that period?

[JRandomFreeper]

Opportunity cost.

/johnny

[Jonty30]

That’s how it works with government contacts.

[glorgau]

If you can’t make money building ships, then try and make some money scrapping ships.

[getarope]

From the movie “Short Circuit”: NO DISASSEMBLE!!

[9thLife]

Scrap ship, retire financing, take (and carry forward) loss, get deduction.

Or something along those lines.

[Jack Hydrazine]

http://en.wikipedia.org/wiki/Baltic_Dry_Index

[nascarnation]

Or how about scrapping your oldest, most inefficient ships and replace with better ones when biz picks up?

[9thLife]

Or how about scrapping your oldest, most inefficient ships and replace with better ones when biz picks up?

All that, but (just guessing) the driver on super high cost capital equipment is cash flow in order to cover the financing costs.

[9thLife]

There are some good charts out there...

And from the Greeks, who ought to know...

...and, finally, the Dallas Fed cites it here (and this is the best chart book I've seen in a long time -- highly recommended. Subscribe if you can.

[9thLife]

).

[thouworm]

http://www.shtfplan.com/headline-news/report-stunning-pictures-americas-supply-chain-is-in-shutdown-could-derail-the-economy-completely_02122015