Tuesday, July 5, 2011


News of the shipping slowdown begins with this report from Reuters.com

The Baltic Exchange's main sea freight index , which tracks rates to ship dry commodities, fell for a third day on Thursday as slower cargo business on the capesize and panamax markets took their toll.

Brokers said they were watching for further developments in China, which is facing its worst power shortages in years and likely to have an impact on dry freight activity. Uncertainty over prospects for the world economy could also potentially hurt demand for raw materials.

The overall index fell 0.49 percent or 7 points to 1,413 points. Prior to the drop, it had risen for four sessions previously. The index has declined over 20 percent this year.
A decline of 20% over 6 months in the shipping world is BIG. But hey it gets better as this IFW-net.com report shows. 

In its latest market commentary, shipbroker ACM/GFI said little had changed over the past two weeks and market sentiment remained “dismal”.

It said: “Additionally, just to paint how depressed the current freight market is, one of our contacts in the US told us that to ship a 40ft container of grain door-to-door from Chicago to Kaoh Siung in Taiwan, the all-in rate in the current market is $1,250 per feu.

“That equates to a freight rate of $44 per tonne, which is cheap as chips.”

The broker added: “With no shortages of containers and what appears to be a poor harvest this year, carriers are facing weak volumes, not only on head-haul routes, but also on the back-haul.”

On the Shanghai-North-west Europe trade, it said: “We saw the recent months fall in value reflecting the weak sentiment in the market that general rate increases (GRIs) are unlikely until the start of Q4.

“However, despite Q3 and Q4 trading at 10% and 16% premium respectively to the spot market, we are seeing more buying interest for these periods, with expectations that the market is starting to reach a bottom.”

According to the Shanghai Containerised Freight Index (SCFI), prices from Shanghai to Europe fell $24 to $821 per teu last week, while rates from Shanghai to the Mediterranean slipped to $949 per teu, a decline of $4 on two weeks ago.

Prices from Shanghai to the US West Coast increased $19 last week, compared with the week before, to reach $1,652 per feu and prices from Shanghai to the US East Coast increased $79 to reach $3,113 over the same period.

SeaIntel’s Lars Jensen said at a recent conference that operating costs were the lowest for liner companies in the ultra-large container vessels segment, provided they were running at full utilisation levels. 
This what an economic slowdown looks like and it has very wide ranging effects.

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