Even though the Baltic Dry Index, which measures freight rates rates for bulk transport, is well off its lows, other indicators of shipping activity are less encouraging. Containers shipment, which handles higher value added goods, is still falling and is expected to remain low in 2010.
From the Los Angeles Times (hat tip DoctoRx):
Trade at international ports is on track to drop more than 10% this year, one of the steepest declines ever…
Cargo ships will carry 27 million fewer containers by year’s end than they did in 2008 — a reduction roughly equivalent to all of the cargo containers handled by the five busiest U.S. seaports in a typical year, according to London-based Drewry Shipping Consultants’ Container Forecaster Report.
“There has never been a decline like this before. We have never seen numbers like these,” said Neil Dekker, editor of the Drewry report. “The container industry is looking at a $20-billion black hole of losses. We can expect a lot of casualties.”…
“The forecasts for 2010 call only for a very moderate recovery in trade volume. This is a long-term problem. It will take several years for us to get back to the trade levels we saw in 2006 and 2007,” Kyser said.
At the Port of Long Beach, the nation’s second-busiest container port behind Los Angeles’, trade volumes have been knocked back all the way to 2003 levels, according to spokesman Art Wong, wiping out all of the trade gains recorded during the boom years of 2004 through 2007. Similar results can be found at many of the major U.S. ports…
The continuing global recession has run so deep that it has caused Moody’s Investors Service to downgrade its outlook to negative overall for the 53 U.S. ports whose credit ratings it tracks.
But there is a bright spot for Los Angeles and Long Beach…”Los Angeles-Long Beach are the two most highly rated ports in the U.S. Two of the primary drivers are their strong financial situations and their competitive market positions,” said Baye Larsen, an analyst and assistant vice president at Moody’s. “Both are a key advantage for those ports. They will be among the first to benefit when the recovery does come.”..
There are few indications that the turnaround will begin any time soon. The trade route that had been the most resilient in the face of the global recession — between Asia and Europe — has now succumbed to the downturn as well. So far this year, the last three years of growth in trade between Asia and Europe have been erased, Dekker said….
Freight rates for transpacific trade, the amount that shipping lines can charge for a typical 40-foot container for cargo moving between Asia and the West Coast of the U.S., have plummeted to $920 from $1,400 at the beginning of the year, according to the Drewry report.
The continued slump has dashed the hopes of many in the industry, who had come to believe that the recession had bottomed out and that a recovery was beginning.
“At this moment we can’t see anything particularly positive around the corner,” Dekker said. “We don’t want to be overly negative. That is just the reality.”
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Two things on Bloom:
1/ Failed bond auction in China (China's $4.1 Billion Auction of Yuan Debt Falls Short)
2/ John Meriwether Said to Shut JWM Hedge Fund
a
View,
Thanks. Saw Meriwether article, not China one.
I'm "a" not "View"! Not that it matters in the big scheme of things…
a
Does this report and others similar argue for a re-evaluation of the impact of Hawley-Smoot Tariff Act in the Great Depression.
This trade data is very consistent with what happened during the Depression… I'm not sure what history you are reading where you think Smoot-Hawley needs to be "re-evaluated".
Here is the history: Trade fell fast because it was a depression, countries started putting in protectionist measures (not just the US) to protect their jobs (beggar thy neighbor)… this exacerbated the trade downturn and made a ‘pretty good’ depression a ‘great’ depression.
This protectionism especially hurt the US because we were very export dependant at the time relative to our European trading partners… so Smoot-Hawley was us shooting ourselves in the foot, while the Europeans pulled out of the depression much faster
And since people don’t change… today we have China (hugely export dependent) putting in all kinds of protectionist measures while their developed world partners are resisting since we have been there before. However, if they do it enough their trading partners will have to respond in kind. It is a prisoners dilemma… work together and it is not as bad, look out for yourself and everyone is screwed.
This trade data is very consistent with what happened during the Depression… I'm not sure what history you are reading where you think Smoot-Hawley needs to be "re-evaluated".
Here is the history: Trade fell fast because it was a depression, countries started putting in protectionist measures (not just the US) to protect their jobs (beggar thy neighbor)… this exacerbated the trade downturn and made a ‘pretty good’ depression a ‘great’ depression.
This protectionism especially hurt the US because we were very export dependant at the time relative to our European trading partners… so Smoot-Hawley was us shooting ourselves in the foot, while the Europeans pulled out of the depression much faster
And since people don’t change… today we have China (hugely export dependent) putting in all kinds of protectionist measures while their developed world partners are resisting since we have been there before. However, if they do it enough their trading partners will have to respond in kind. It is a prisoners dilemma… work together and it is not as bad, look out for yourself and everyone is screwed.
The physical volume is way down because many Chinese makers have shifted to higher margin / value added goods that are less bulky.
At the same time, local governments have been less than thrilled about their enterprises trying to grab share by undercutting prices — cutting a large source of de facto trade subsidies.
Finally, many Chinese firms that shipped goods on credit to buyers have been burned as the buyers failed to pay — leaving them with uncollectable debts.
Vendors are now more careful, and are insisting on confirmed Letters of Credit or cash even if the order apparently originated with a large, known foreign firm like Home Depot.
>>> The forecasts for 2010 call only for a very moderate recovery in trade volume. This is a long-term problem. It will take several years for us to get back to the trade levels we saw in 2006 and 2007 <<<
I can't help but shake my head (and occasionally, my fist) at these people who can't just accept that this is a permanent state of affairs. This decline/adjustment is permanent. The previous Walmart buying sprees are over. Credit is over. The only credit that is now created is that made especially so that the banks can steal it. This is the era of legal national treasury robbery (here you may replace the word "robbery" with "bailout", if you feel so inclined).
Vinny G. — modern-day realist, coffeeshop philosopher, dispeller of ignorance, and above all, bestower of common sense… :)