Skip to main content

Dry bulk shipping boom

With the Baltic Exchange Dry Index (BDI) still up near its recent highs above the 10,000 mark, many are wondering if the shipping boom driven by Asian demand will hold.

The Financial Times recently took up this issue by highlighting the view of one shipping executive, Nobu Su, chief of Taiwan Maritime Transport, who offered that current freight shipping rates were "insane".

Here's more from FT's article, "Dry bulk bubble may have bouyancy to spare".

Nobu Su's outspoken comments about the bulk cargo market shine a spotlight on a remarkable piece of price inflation that has been little noticed outside the closed world of shipping.

On Friday, the Baltic Exchange, which collects information about shipping markets, was quoting the standard charter rate for a Capesize dry bulk carrier - the largest kind, so called because it has to sail around Cape Horn and the Cape of Good Hope rather than use the Panama or Suez Canals - at $179,527 per day.

The same rate a year ago was $69,235. The increase is pushing up sharply the costs of many users of the vital commodities that such ships carry - particularly coal and iron ore.

For some commodities, according to Mr Su, the cost of transport can be twice as much as the cost of the cargo when it was delivered to the ship.

So as you see from that last statement, transport costs for in demand commodities have become remarkably expensive.

You don't have to know your Panamax from your Capesize to be able to understand this last point. Just imagine shipping a gift package to a friend by postal service or Fed Ex, only the shipping cost is twice what you spent on the gift.

In that case, you might say "to hell with that, I'll send a card". But in China or India's case, there has been little option but to pay the required rates for much needed commodities.

Will freight costs peak in 2008 or will they retrench a bit, only to keep on rolling? This is a big point of debate, as the shorter-term future of the global economy seems to be wrapped up in this question.

One last point to mention here: notice the chart of the Baltic Dry Index (BDI) vs. the Shanghai Composite (FXI). Is there a strong correlation here?

It seems, judging from this rather short time period, that there has recently been an observable link between the two, with FXI possibly leading the BDI by a couple of months. Thoughts?

Popular posts from this blog

New! Finance Trends now at FinanceTrendsLetter.com

Update for our readers: Finance Trends has a new URL!  Please bookmark our new web address at Financetrendsletter.com Readers sticking with RSS updates should point your feed readers to our new Finance Trends feedburner .   Thank you to all of our loyal readers who have been with us since the early days. Exciting stuff to come in the weeks ahead! As a quick reminder, you can subscribe to our free email list to receive the Finance Trends Newsletter . You'll receive email updates about once every 4-8 weeks (about 2-3 times per quarter).  Stay up to date with our real-time insights and updates on Twitter .

Moneyball: How the Red Sox Win Championships

Welcome, readers . T o get the first look at brand new posts (like the following piece) and to receive our exclusive email list updates, please subscribe to the Finance Trends Newsletter .   The Boston Red Sox won their fourth World Series title of t he 21st century this we ek. Having won their first Se ries in 86 years back in 200 4, the last decade-plus has marked a very strong return to form for one of baseball's oldest big league clubs. So how did they do it? Quick background: in late 2002, team own er and hedge fund manager, John W. Henry (with his partners ) bought the Boston Red Sox and its historic Fenway Park for a reported sum of $ 695 million. Henry and Co. quickly set out to find their ideal General Manager (GM) to help turn around their newly acquired, ailing ship. This brings us to one of my fav orite scenes from the 2011 film , Moneyball , in which John W. Henry (played by Ar liss Howard) attempts to woo Oakland A's GM Billy Beane (Brad Pi

William O'Neil Interview: How to Buy Winning Stocks

Investor's B usiness Daily founder and veteran stock trader, William O'Neil share d his trading methods and insights on buying winning stocks in an in-depth IBD radio interview. Here are some highlights from William O'Neil's interview with IBD: William O'Neil's interest in the stock market began when he started working as a young adult.  "I say many times that I didn't get that much out of college. I didn't have much interest in the stock market until I graduated from college. When I got married, I had to look out into the future and get more serious. The investment world had some appeal and that's when I started studying it. I became a stock broker after I got out of the Air Force."    He moved to Los Angeles and started work in a stock broker's office with twenty other guys. When their phone leads from ads didn't pan out, O'Neil would take the leads and drive down to visit the prospective customers in person.