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marmar

(76,982 posts)
Thu Nov 19, 2015, 10:57 AM Nov 2015

Baltic Dry Shipping Index Drops to All-Time Low


(Bloomberg) 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.



“The main issue is the lack of demand for iron ore from China,” Eirik Haavaldsen, a shipping analyst at Pareto Securities AS in Oslo, said by phone. “This market is looking like a disaster and the rates are a reflection of that. It is looking scary for the market and it doesn’t look like there is going to be any life in the market in the near term.”



Just as China’s surging imports of iron ore and other commodities led a surge in the Baltic Dry Index to a record in the last decade, now rates are sliding ever lower as that growth stalls. The nation’s ore purchases will expand by just 1 percent in 2016, about half this year’s expansion and the weakest pace in six years, according to data from Clarkson Plc, the world’s biggest shipbroker. Global trade in the raw material will increase the most slowly since 2001. China’s economy will grow by 6.5 percent in 2016, the least in a generation, economists’ forecasts compiled by Bloomberg show. ................(more)

http://www.bloomberg.com/news/articles/2015-11-19/baltic-dry-ship-index-drops-to-record-as-iron-ore-growth-slump




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Baltic Dry Shipping Index Drops to All-Time Low (Original Post) marmar Nov 2015 OP
Wow, so happy to see a BDI post... CoffeeCat Nov 2015 #1
Two factors Turbineguy Nov 2015 #2

CoffeeCat

(24,411 posts)
1. Wow, so happy to see a BDI post...
Thu Nov 19, 2015, 11:27 AM
Nov 2015

I check the BDI a few times a week. I rarely find anyone who is interested in the data.

Hello!

This is definitely bad news. I find the data interesting, but it's difficult to ascertain what is going on behind the numbers. Even if the media provides some headlines and explanations--these drastic drops can subject to spin.

This article focuses on decreases in the demand for coal and iron ore. That makes sense.

However, I'm assuming that there is more to this BDI tailspin because these numbers are worse than the numbers immediately after the 2008 crash.

It appears that the demand for ALL raw materials (not just coal, iron ore) is plummeting. I'm guessing that this signals downward shifts in the demand curves for most raw materials--and not just in China (on which the article focuses).

Numbers that sink below the record 2008 floor--seem to signal a global economic catastrophe.

I'm not an economist. So I'm open to being wrong and learning more. I find the BDI incredibly useful and fascinating. They can spin and fix unemployment numbers, the CPI or consumer confidence. But the BDI is a pure supply/demand number--based on the price that is costs to ship raw materials around the world. When demand falls, the price falls. When demand rises, the price rises.

Questions remain about what is behind the numbers. It makes sense that China and the decreased demand for coal and iron ore are creating a downward pressure, but it seems likely that there are many other factors bringing down global demand.

This signals very deep economic problems all over the globe, especially since we're below 2008-crash numbers.





Turbineguy

(37,212 posts)
2. Two factors
Thu Nov 19, 2015, 12:04 PM
Nov 2015

change in commodity demands or a change in the number of ships.

Just saw a charter had been sign for 6 containerships of 21,000 TEU size. When there's a glut, rates drop and commodities that used to be carried in bulk shift to containers (faster and more flexible delivery).

China is also shifting to a higher tier of industrial production. In addition, the Chinese economy is becoming more internal while export drop in relation.

Never the less the, Index is important to watch.

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