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| International Trade Comes To A Halt |
| 2009-01-13 |
| Freight rates for containers shipped from Asia to Europe have fallen to zero for the first time since records began, underscoring the dramatic collapse in trade since the world economy buckled in October. "They have already hit zero," said Charles de Trenck, a broker at Transport Trackers in Hong Kong. "We have seen trade activity fall off a cliff. Asia-Europe is an unmitÂigated disaster." Shipping journal Lloyd's List said brokers in Singapore are now waiving fees for containers travelling from South China, charging only for the minimal "bunker" costs. Container fees from North Asia have dropped $200, taking them below operating cost. Industry sources said they have never seen rates fall so low. "This is a whole new ball game," said one trader. The Baltic Dry Index (BDI) which measures freight rates for bulk commodities such as iron ore and grains crashed several months ago, falling 96pc. The BDI – though a useful early-warning index – is highly volatile and exaggerates apparent ups and downs in trade. However, the latest phase of the shipping crisis is different. It has spread to core trade of finished industrial goods, the lifeblood of the world economy. Trade data from Asia's export tigers has been disastrous over recent weeks, reflecting the collapse in US, UK and European markets. Korea's exports fell 30pc in January compared to a year earlier. Exports have slumped 42pc in Taiwan and 27pc in Japan, according to the most recent monthly data. Even China has now started to see an outright contraction in shipments, led by steel, electronics and textiles. A report by ING yesterday said shipping activity at US ports has suddenly dived. Outbound traffic from Long Beach and Los Angeles, America's two top ports, has fallen by 18pc year-on-year, a far more serious decline than anything seen in recent recessions. "This is no regular cycle slowdown, but a complete collapse in foreign demand," said Lindsay Coburn, ING's trade consultant. Idle ships are now stretched in rows outside Singapore's harbour, creating an eerie silhouette like a vast naval fleet at anchor. Shipping experts note the number of vessels moving around seem unusually high in the water, indicating low cargoes. It became difficult for the shippers to obtain routine letters of credit at the height of financial crisis over the autumn, causing goods to pile up at ports even though there was a willing buyer at the other end. Analysts say this problem has been resolved, but the shipping industry has since been swamped by the global trade contraction. The World Bank caused shockwaves with a warning last month that global trade may decline this year for the first time since the Second World War. This appears increasingly certain with each new batch of data. Mr de Trenck predicts Asian trade to the US will fall 7pc this year. To Europe he estimates a drop of 9pc – possibly 12pc. Trade flows grow 8pc in an average year. He said it was "illogical" for shippers to offer zero rates, but they do whatever they can to survive in a highly cyclical market. Offering slots for free is akin to an airline giving away spare seats for nothing in the hope of making something from meals and fees. |
| Posted by:Anonymoose |
| #14 That may be true, Mike N., but coming in second does not mean we are off the hook. |
| Posted by: Alaska Paul in Haines, AK 2009-01-13 23:04 |
| #13 I'm sorry, but if shipping is down 9 percent in one part of the world and 12 in another etc. That's a long ass way from a grinfing halt. And the low rates are an obvious result of over capacity. Some shippers are going to have to fold. Big friggin deal. I honestly hope this recession is worse than I think it will be. The worse it is, the harder it is on China and our other enemies. Never thought I'd say this, but we might have to thank our donk friends for crippling our enemies. |
| Posted by: Mike N. 2009-01-13 22:55 |
| #12 I thought Soros just bought Indy-Mac a few days ago? |
| Posted by: 3dc 2009-01-13 21:43 |
| #11 Poison Reverse: Don't count on the FDIC. Just yesterday it was let slip that the Schumer-caused failure of Indy-Mac bank in California, actually has outstanding debts $10B greater than known. They had been foisting bad loans off onto Freddy Mac. But the FDIC is now on the hook for that extra $10B, and they only have about $35B in reserves, total. Though the FDIC can directly tap into the Treasury, the assumption has long been that there would be something in the Treasury for them to tap into. And this may no longer be the case. Once that now $25B is committed, the FDIC will likely be unable to insure accounts for even $1, much less a quarter million dollars each. That they just raised from $100k. This does not look good. |
| Posted by: Anonymoose 2009-01-13 21:23 |
| #10 bigjim-ky, this is something I'm trying to remember from 20 (twenty) years ago, but shipping trade has a lag of 3 to 6 months before it hits the shelves. In other words, if it's true then we won't see it until April or July at latest. |
| Posted by: AlmostAnonymous5839 2009-01-13 20:29 |
| #9 International trade has not come to a halt. It has slowed. I work for a company that trades internationally. 3 weeks ago orders were almost nil, but the last 2 weeks have seen a marked increase in overseas orders. Nothing like back in the Spring or Summer but still positive. |
| Posted by: Deacon Blues 2009-01-13 20:16 |
| #8 Yup, the stores are still full of sh*t. When the shelves are bare, I'll believe that intl. trade has come to a halt. I'd say shippers want the govt. to subsidize their business too. They see all the handouts and figure they'll give it a try. |
| Posted by: bigjim-ky 2009-01-13 18:38 |
| #7 There is something going on here beyond what we are being told. This smells like manipulation more than just an economic collapse. |
| Posted by: crosspatch 2009-01-13 18:28 |
| #6 Does this mean that the cargo container nuke scenario can now go from Pakistan to Europe free of charge? |
| Posted by: Laurence of the Rats 2009-01-13 18:10 |
| #5 has fallen by 18pc year-on-year Epik collapse? 18% few big screen, damn, how can we continue to function? |
| Posted by: .5MT 2009-01-13 18:05 |
| #4 I disagree with depression outlook. Some of the top economists that saw this coming see it as a L-shaped recession rather than U-shaped recession or depression. Don't get happy. A L-shaped recession that lasts 3-5 years is really really bad. But your checking and savings are safe in a FDIC insured bank. T-Bonds are also safe. If the FDIC did not exist, I would agree with the depression theory. |
| Posted by: Poison Reverse 2009-01-13 18:03 |
| #3 America gets the flu, the world gets pneumonia. Remember the line about all our trade being dependent upon each other - well, all lines lead to America. They been far more dependent upon us than us on them. Han Solo: You said you wanted to be around when I made a mistake, well, this could be it, sweetheart. Princess Leia: I take it back. |
| Posted by: Procopius2k 2009-01-13 17:09 |
| #2 The problem is that while the interbank market has been thawed, the letter of credit market is still frozen. People want to trade, but they can't be assured of payment so they aren't shipping. So Darth is right, this will be a depression, including in the US, though the greatest political repercussions should be in China |
| Posted by: Nimble Spemble 2009-01-13 16:25 |
| #1 This is why I believe this downturn will be a full blown depression in most parts of the world rather than a "deep" rescission. The raw and base manufacturing supply lines are shutting down. |
| Posted by: DarthVader 2009-01-13 16:17 |