Baltic Dry Index Nosedive

[Cid_Yama]

Look at the 5 yr on the interactive. Last time the BDI was this low. Containers started stacking up on the docks as it was no longer profitable for the ships to run. Ships anchored up in ports worldwide.

Letters of credit dried up as no one wanted to back shipments that barely covered costs.

Although it's true that the BDI covers bulk cargoes, it is a leading indicator of the entire global shipping industry and the global economy as a whole.

An important thing to note. Many ships were scrapped after the bottom in 2008. Shipyards went out of business. New construction came to a halt. The reduction in available ships should have caused the index to rebound. The fact that it is now below 1500, reflects that there is a fall off in global demand even for the fewer ships that are left.

[Armageddon]

BDI Is collapsing again

http://www.bloomberg.com/apps/quote?ticker=BDIY:IND

[Newfie]

You really need to move that over to the 5-year time scale to get a sense of what it is doing.

This one has a 10-year span, even better.

http://investmenttools.com/futures/bdi_ ... _index.htm

At first I thought "Oh boy, here we go again." But in reading the ariticle it seems that they are attributing the decline not to a lack of produce to move but to a glut of new cape size ships. (IIRC - A capesize is too be to fit through the Panama Canal.)

So this may not be as bad as it looks. I wonder if it is a unintended condition of all that low interest money flowing around. Money is cheap so, yards are hungry, so why not build some ships now and have them around for when the market heats up?

[Daniel_Plainview]

Baltic Dry Index in Freefall

Baltic Dry Index 187 Away From Triple Digits

Submitted by Tyler Durden on 01/27/2011 08:23 -0500

The freefall in the BDIY is just ridiculous: following a steep plunge it has now gone in freefall, and is down 3.9% overnight to 1,186. And to all who are claiming that the index is merely indicating a supply glut from the onslaught of new ship arrivals, well the entire orderbook (in progress) has been public and transparent - to claim it is a surprise is about as "naive" as stating that 5 computers and a bunch of NYU kids control the US stock market. As for how much longer it will keep dropping? Well: he post Lehman low was 663. There is still a lot of pain. Especially if one is a non-chartered dry bulk shipper... With leverage.

linky winky

[JohnRM]

The BDI didn't nosedive, it just never really recovered to pre-recession levels. We're pretty much right back where we were in 2006. As Officer Barbrady would say; "Move along now. Nothing to see here."

[ralfy]

Deserves a bump? BDI just dropped again, close to both 2009 and 2002 levels:

http://investmenttools.com/futures/bdi_ ... _index.htm

[ralfy]

The BDI didn't nosedive, it just never really recovered to pre-recession levels. We're pretty much right back where we were in 2006. As Officer Barbrady would say; "Move along now. Nothing to see here."

Gee, thanks for that worthless point.

[Newfie]

Thanks for the bump. Worth watching.

Seems to be a combination of lower shipping and new ships coming on line.

Which would indicate a slowdown in shipbuilding as well?

That too would tend to push the global economy downward.

[eXpat]

And still going down...
Look at that chart
http://stockcharts.com/h-sc/ui?s=$BDI&p=D&st=2009-01-01&en=%28today%29&id=p31943939073

[Cid_Yama]

The cheap labor overseas is disappearing.

China province raises minimum wage by 23%

Sichuan province in southwest China has increased the minimum wage sharply to try and attract workers amid a rapidly rising cost of living.

Sichuan raised the minimum monthly wage by 23.4% starting on 1 January, state news agency Xinhua said on Thursday.

That is one of the biggest increases, with most other provinces raising wages in line with government advice of 13%.

Severe labour shortages in Chinese cities have prompted wage rises in many provinces this year and last.

link

A total of 21 regions across China adjusted their minimum wage standards in the first three quarters of the year, with an average overall increase of 21.7 percent year-on-year, the Ministry of Human Resources and Social Security revealed Tuesday.

By the end of September, 21 provincial-level regions, including Beijing, Tianjin and Shanxi had adjusted their minimum wages, Yin Chengji, the ministry's spokesperson, told a press conference Tuesday.

According to him, 25 provinces in total have issued guidelines for this year's wage increase, setting the baseline of wage growth to above 14 percent year-on-year.

link

Globalism wasn't onesided, favoring the employer. It is resulting in higher wages worldwide. Costs are now approaching parity with domestic production.

Those exploitable peasants are getting harder to find.

There have been massive labor protests across China since November.

[Outcast_Searcher]

And still going down...
Look at that chart
http://stockcharts.com/h-sc/ui?s=$BDI&p=D&st=2009-01-01&en=%28today%29&id=p31943939073

What does this have to do with anything except doomers trying to stay in denial mode? The chart looks like a random number generator short term, and has no meaningful correlation to the gradual economic recovery we've been seeing the past two years in the U.S. -- scary debt and euro issues -- bad as they are, are not stopping it.

But no, it's much better to find an obscure negative index and convince yourself you're right, no matter how many historically reliable indicators continue to grind slowly and painfully upward. (Of course, yelling at OF2 for daring to post the many positive reliable indicators is also helpful).

[Cid_Yama]

On the contrary. This is a positive development for the US worker. Domestic production will increase.

It's only negative news for the labor exploiters and, of course, the shipping industry.

The US will once again have a vibrant domestic economy where things are produced here and will stay here, so they will be forced to pay a living wage again to have consumers.

This whole globalization thing was a big scam that has run it's course. Labor Colonialism.

The Baltic Dry is not an obscure index.

[SeaGypsy]

The cheap labor overseas is disappearing.

China province raises minimum wage by 23%

Sichuan province in southwest China has increased the minimum wage sharply to try and attract workers amid a rapidly rising cost of living.

Sichuan raised the minimum monthly wage by 23.4% starting on 1 January, state news agency Xinhua said on Thursday.

That is one of the biggest increases, with most other provinces raising wages in line with government advice of 13%.

Severe labour shortages in Chinese cities have prompted wage rises in many provinces this year and last.

link

A total of 21 regions across China adjusted their minimum wage standards in the first three quarters of the year, with an average overall increase of 21.7 percent year-on-year, the Ministry of Human Resources and Social Security revealed Tuesday.

By the end of September, 21 provincial-level regions, including Beijing, Tianjin and Shanxi had adjusted their minimum wages, Yin Chengji, the ministry's spokesperson, told a press conference Tuesday.

According to him, 25 provinces in total have issued guidelines for this year's wage increase, setting the baseline of wage growth to above 14 percent year-on-year.

link

Globalism wasn't onesided, favoring the employer. It is resulting in higher wages worldwide. Costs are now approaching parity with domestic production.

Those exploitable peasants are getting harder to find.

There have been massive labor protests across China since November.

Hardly an honest post without mentioning the base rate; heading "Cheap Labor Disappears'. 23% of what? From $4 a day to $5 a day (a day in Asia generally is 12 hours).

[Cid_Yama]

China has already seen the writing on the wall and is retooling for domestic production. Your wage slaves are gone.

Wages in China are going up 14% year-on-year and has for a couple years now.

China has been faced with nationwide labor protests so that not only are wages going up but working conditions are improving, hours worked are going down, and there is now a labor shortage.

Which makes it no longer profitable to ship long distances.

Nothing dishonest about it.

Zhang said during the 12th China Development Forum hosted by the Development Research Center of the State Council that China will take the expansion of domestic consumer demand as its strategic focus to boost domestic demand, continue to enable investments to play a key role in expanding domestic demand and fully develop domestic demand potential.

Zhang pointed out that China will further reform the income distribution system, improve the social security system, increase domestic consumers' purchasing power and promote consumption in the fields of culture, tourism and construction in addition to strengthening the construction of the market circulation system and improving the consumption environment. China aims to build one of the largest domestic markets in the world.

link

If the US wishes to be able to compete for world resources, it will also have to focus on creating a strong domestic market. Which means higher wages to boost consumption. No more corporate sucking the strength of the nation dry.

We may need to start jailing the corporate thieves that work against the interests of the nation, like China does. China puts them to death as traitors.

[SeaGypsy]

There is a hell of a divide still and wage parity is still nowhere near on the horizon. Anyone who thinks it is is in fantasy land. There are another billion in surrounding countries, many of whom have been travelling to the M/E for $100 a week jobs but are now going to China for a little less but better conditions and closer to home. Don't get me wrong, parity will happen, but even at this pace it is still at least a decade away, and we still haven't really felt the other side of peak il yet.

[Cid_Yama]

Billion? You're dreaming. There is Viet-Nam and Cambodia, and China is scooping up those workers. The region has become a Chinese economic sphere, and the opportunity for western exploitation is past. Bangladesh just faced a fundamentalist Islamic coup attempt. Africa is too unstable and lacks the infrastructure.

The invisible hand has swept the western world's pieces off of the board.

The US does not have a decade to create a strong domestic market if it wishes to remain a strong competitor for the world's resources. China already has a massive head start.

The US has needed 25% of the world's resources to maintain our position in the world even though we only make up 5% of the population. The US has never been closer to losing the dollar's status as the world's reserve currency, which has been our ace in the hole.

We lose our access to the lion's share of the world's resources and we will never recover.

Corporations have spent the last decade acting as if they do not need the US. They have been working to dismantle us, sell off our resources, and create another cheap labor pool.

Instead they are going to find themselves in an unfriendly world without a home, as the game changes back to competing domestic economies.

[eXpat]

Baltic Dry Index falls below 2008 levels, yes, that´s right below.
http://www.bloomberg.com/quote/BDIY:IND/chart
and
http://investmenttools.com/futures/bdi_baltic_dry_index.htm

Bloomberg reports that commodity shipping costs slumped to the lowest in a quarter century as a glut of new carriers overwhelmed demand at a time of slowing global economic growth.

The Baltic Dry Index (BDIY), a measure of costs across four vessel sizes, retreated 2.6% to 662 points today, according to the London-based Baltic Exchange, which publishes rates across more than 50 maritime routes. The gauge fell 61% this year and is now at its lowest since August 1986. Rates for Capesizes, the largest iron ore and coal carriers, dropped 84% since mid-December.

http://www.finfacts.ie/irishfinancenews/article_1023868.shtml

[eXpat]

http://investmenttools.com/futures/bdi_baltic_dry_index.htm
Why Is Global Shipping Slowing Down So Dramatically?

If the global economy is not heading for a recession, then why is global shipping slowing down so dramatically? Many economists believe that measures of global shipping such as the Baltic Dry Index are leading economic indicators. In other words, they change before the overall economic picture changes. For example, back in early 2008 the Baltic Dry Index began falling dramatically. There were those that warned that such a rapid decline in the Baltic Dry Index meant that a significant recession was coming, and it turned out that they were right. Well, the Baltic Dry Index is falling very rapidly once again. In fact, on February 3rd the Baltic Dry Index reached a low that had not been seen since August 1986. Some economists say that there are unique reasons for this (there are too many ships, etc.), but when you add this to all of the other indicators that Europe is heading into a recession, a very frightening picture emerges. We appear to be staring a global economic slowdown right in the face, and we all need to start getting prepared for that.
...
Wherever you look, global economic activity is slowing down. The UK economy and the German economy both actually shrank a bit in the fourth quarter of 2011. About half of all global trade involves Europe in one form or another. As Europe slows down, it is going to affect the entire planet.

Many thought that the German economy was so strong that it would not be significantly affected by the problems the rest of Europe is having, but that is turning out not to be the case.

In a new article by CBS News entitled "German economic slowdown worse than expected?", we are told that industrial production in Germany is declining even more than anticipated....

German industrial production fell 2.9 percent in December from the month before, according to official data released Tuesday, suggesting the country's economic slowdown could be worse than expected.

So don't believe all the recent hype about an "economic recovery". Europe is heading into a recession, Asia is slowing down and the U.S. will not be immune.

Despite what you hear from the mainstream media, the truth is that the U.S. economy is not improving and incredibly tough times are ahead.

http://world.hawaiinewsdaily.com/2012/02/why-is-global-shipping-slowing-down-so-dramatically-2/

[Outcast_Searcher]

http://investmenttools.com/futures/bdi_baltic_dry_index.htm
Why Is Global Shipping Slowing Down So Dramatically?

Why the obvious distortion in the article?

Yes, the BDI is nosediving. And Yes, LOTS of new shipping is coming online. This happens in cycles, with shipbuilding having LONG lead times. There are lots of articles and discussions on this in places like "Seeking Alpha" where making investment decisions based on DATA is a major goal.

The idea that there is NO evidence of economic improvement clearly flies in the face of reality, unless you want to, for example, call the employment improving in the U.S. some kind of conspiracy theory.

Data points are good, when provided in reasonable context. When distorted to further an agenda -- it's just like politics -- generally BAD.

[Newfie]

There may be a simpler explanation, that the folks who buy and build ships don't have a clue as to what they are doing with investments, just as the Wall Street brokers didn't know what they were doing.

Just a bunch of technically smart blue pill types trying to game the system.

Perhaps.