Worldwide Shipping Grinding to a Halt

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ckessel's picture
ckessel
Status: Martenson Brigade Member (Offline)
Joined: Nov 12 2008
Posts: 411
Worldwide Shipping Grinding to a Halt

The Baltic Dry Index which represents the worldwide demand for raw materials has come to a virtual standstill having fallen 93%. Unlike the stockmarkets, the BDI is not easily manipulated and because of that is a reliable indicator of the potential for future economic trends.

See the full story on this site:    

This is potentially a very scary scenario as regards wordwide food shipments. The only article I have seen on the news is that the Port of Los Angeles in Long Beach has a huge stockpile of undelivered cars. Has anyone else heard any mention of this issue?

Coop

machinehead's picture
machinehead
Status: Diamond Member (Offline)
Joined: Mar 18 2008
Posts: 1077
Re: Worldwide Shipping Grinding to a Halt

Cargo vessel construction is highly cyclical. So the Baltic Dry
Index responds in leveraged fashion to changes in world trade ... plus
additional supply coming on at the worst possible time (vessels ordered
during the late Bubble II). Vessel construction is like a housing
market where the houses are as big as skyscrapers, with multi-year lead
times. Oof!

The macro question is whether the 60-year secular
trend toward freer trade has reversed. Self-sufficiency can be
tactically valuable, within limits. But economies which wall out
more-efficient foreign suppliers end up looking like Cuba and North
Korea -- backward, destitute, and poverty-stricken.

Set's picture
Set
Status: Silver Member (Offline)
Joined: Sep 26 2008
Posts: 112
Re: Worldwide Shipping Grinding to a Halt

I read about this a few days ago.  It does seem alarming.  Here are a few links that provide more information.

 

http://www.investmentu.com/IUEL/2008/November/baltic-dry-index.html

 

http://www.post1.net/lowem/entry/baltic_dry_index_falls_93_as_shipping_rates_plunge_signalling_global_economic_collapse

pir8don's picture
pir8don
Status: Gold Member (Offline)
Joined: Sep 30 2008
Posts: 456
Re: Worldwide Shipping Grinding to a Halt

Be a bit cautious of the BDI. It's had quite a bit of press over the past few months but it is a very volatile index and when looked at reveals itself best over a longer time. It lost around half of its value early last year then recovered to its new peak before plummeting to present low levels in Oct, Nov. Not to say that it isn't significant just that its also volatile. It has been suggested that local stocks of at least three months and price oportunities (importers waiting for prices to fall) may partly explain the recent volatility. Only more time will tell.

Don

ckessel's picture
ckessel
Status: Martenson Brigade Member (Offline)
Joined: Nov 12 2008
Posts: 411
Re: Worldwide Shipping Grinding to a Halt

Thanks for the valuable comments above. That sheds more light on the reasons why the ports could be so empty.

Coop

jpbeer's picture
jpbeer
Status: Member (Offline)
Joined: May 18 2008
Posts: 8

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