World Shipping Hit by Slump in Global Trade
Dashing hopes of a quick recovery from the global trade recession earlier this year, world shipping has fallen into a deep slump over the late summer, says a report in the Telegraph.
Commodity turmoil could blow the shipping industry off course.
The global shipping industry has been contending with headwinds from tumbling commodity prices for months. The Baltic Dry Index (BDI) - a gauge of shipping costs - dropped to its lowest point since 1985 during the period, with the market weighed down by "an oversupplied fleet and a slowdown in seaborne demand".
Shipping freight rates for transporting containers from ports in Asia to Northern Europe fell by 23.2 percent to $640 per 20-foot container (TEU) in the week, according to the Shanghai Containerized Freight Index.
The drop came after a similar fall of 24.9 percent in the previous week. Freight rates on the world’s busiest shipping route have tanked this year due to overcapacity in available vessels and sluggish demand in goods to be transported.
Manufacturing activity in New York plunged to its weakest level in August since 2009 due to steep drops in new orders and shipments, although optimism on future business improved, a New York Federal Reserve survey showed on Monday. The New York Fed's Empire State general business conditions index tumbled from 3.86 in July to -14.92 in August, its lowest since April 2009.
Manufacturers in China are playing a cat-and-mouse game with commodity brokers, stockpiling raw materials to delay purchases and then taking advantage of the increase in supply that follows. This will continue to affect the market as manufacturers look towards restocking in the next six to twelve months as their supplies run dry.
There is now a full-blown August storm sweeping through global markets. The Bloomberg commodity index dropped to a fresh 13-year low on Monday and the MSCI index of emerging market equities touched depths not seen since August 2009.
Ports across the world suffer worst hit since the Lehman crisis as emerging markets wilt, but trade may not matter so much to global GDP any longer.
The port of Hamburg said trade with Russia collapsed by 36pc, the latest evidence that the rouble crash and Continued from Page 25 deepening recession has forced Russian consumers to cut back drastically on purchases of imported cars and heavy goods.
Yet more recent data from Container Trades Statistics shows that global volumes fell 3.1pc in June from the already depressed levels the month before. This has come as shock: the period from June to August is typically the strongest time of the year, boosted by pre-shipments for the Christmas season.
Analysts say that the shipping companies simply needed to weather the storm. It’s just a matter of waiting for that excess capacity to be absorbed.