Thursday, October 23, 2008

Shipping

We're at the time of year where shipping should be ramping up.

We should be seeing raw material shipments ramping up for the Christmas production season. Instead, ships are being parked. Ok, partially due to Brazil and China refusing to sign a new iron ore agreement. But also due to week demand.
Baltic Dry Index at Naked Capitalism

Who quotes bloomberg The Baltic Dry Index, a measure of commodity-shipping rates, fell to the lowest in more than six years in London yesterday as slowing economic growth cuts demand to move coal, iron ore and steel. Commodity shippers will begin to collapse within the next six months and ``significant'' numbers may fail within two years, according to Fearnley Fonds ASA, a specialized maritime investment bank.

``Demand for commodities is definitely slowing down,'' Yu Mengguo, a senior analyst at Jinpeng International Futures Co., said in a phone interview from Beijing today. ``That's being reflected in tumbling prices, which we can't see the bottom for right now.''

Commodity prices are slumping worldwide on speculation a global economic slowdown will reduce demand. The Reuters/Jefferies CRB Index, which tracks commodity futures prices for 19 raw materials, plunged to the lowest in four years yesterday.

The Baltic Dry Index fell 66 percent in the three months to Sept. 30, the largest quarterly drop since the exchange began compiling the data. The measure of commodity-shipping costs is down 62 percent so far this month at 1,221 points, after rising to a record high of 11,793 points on May 20. It fell for a 13th consecutive day yesterday.



Translation: Shipping jobs are disappearing.


WSJ on the shipping decline
TEXT
What struck me from the WSJ article:
On Thursday, package-delivery giant United Parcel Service Inc. said it had "precipitous declines" last month in volume of next-day-delivery products, a high-margin business, a month when shipping normally has begun picking up ahead of the holiday season.

Where are you Rob Dawg? Christmas is looking to be as you predicted it.

WSJ already reported on declining premium airline passengers.
The International Air Transport Association, a global trade group, says that demand from premium airline passengers began to wane early in the summer. After modest growth during the first five months of the year, premium traffic dropped slightly in June and then fell 1% in July, compared with demand levels a year ago. That decline "most likely reflects a fall in business travel, driven by the increasing weakness of major economies," the association says.

Or just look up your favorite airline's ticker symbol and plot its two year graph. :(

Forbes on rail
At least rail traffic isn't too bad. Mostly thanks to coal and grain
Volume rose 0.9 percent in the West, where cargo is primarily carried by Union Pacific Corp. (nyse: UNP - news - people ) and Burlington Northern Santa Fe Corp. (nyse: BNI - news - people ) Volume fell 1.6 percent in the East, where freight is mostly hauled by CSX Corp. (nyse: CSX - news - people ) and Norfolk Southern Corp. (nyse: NSC - news - people ) Hurricanes Gustav and Ike dragged down volumes in previous weeks.

The number of carloads last week was down 0.1 percent from last year to 336,457 cars, AAR (nyse: AIR - news - people ) reported.

Intermodal volume rose 0.8 percent from a year ago. Intermodal involves moving freight from one method of transportation to another, such as truck to rail.

So far this year, shipments on U.S. rails are down 0.2 percent compared with the same period in 2007.


I also find the trend in oil prices very interesting. I predicted oil would get back to $80/bbl, but that was for ~2Q2009. Demand destruction is an indication that both people and product are not being moved.

Great lakes shipmets up just confuses me.
But CR had a chart showing that Texas up is a growing area... Is great lakes cargo being railed to/from those growing areas? I cannot help but notice that the Great Lakes states are falling apart economically...

So transportation is a mixed indicator right now. But I believe strongly that if businesses are not moving ore or flying to initiate new business, its a strong negative indicator. But its not all dark.

I remain convinced this is a reflection of the Bank Panic of 1907 and not 1929. Oh, that was an ugly time. But there are durations of ugly.

Edit 12/24: CR on declining port of LA-Long Beach Traffic
Inbound traffic should be peaking for the year as retailers prepare for the holiday season. Inbound traffic is off from August, and about 12% below last September.

Outbound traffic fell off a cliff in September, and is 17% below August 2008, and at about the same level as a year ago.


So bad... but not yet ugly at the ports.

Got Popcorn?
Neil

4 comments:

The Anonymous said...

Oil I see as not only the bursting of a commodity bubble (i.e. deflation), but also the hedge funds who bid it up are cashing out for fear of upcoming redemptions. Talk about a double whammy!

Great lakes shipping? Hmm, I heard somehting about Canada (and the Loonie) doing surprisingly well - maybe this has something to do with it?

Something else I saw the other day in the WSJ re the dollar. Apparently, there was some jackass consultant running all around latin america, and telling large copanies (grocery stores, textile manufacturers, etc.) to get into currency trading, and to go against the Dollar! These were companies whose core business had nothing to do with forex, but yet they went all in and now they are getting burned. We are talking Tens if not hundreds of billions of dollars here - just incredible!

wannabuy said...

We are talking Tens if not hundreds of billions of dollars here - just incredible!
That trading just took out Commercial Mexicana, the #3 retailer in Mexico; their major store is something called something like "Gigante" and competes versus Walmart.

Yea... there was an overall 'get rich quick' mentality that is coming apart.

Much of this could just be the hedge funds unwinding. That means we have another six months of this...

Got Popcorn?
Neil

aClem said...

Neil,

Does that 'consumers' reference in CR have anything to do with the Pohl/Kornbluth 'Space Merchants?' Was your reference a sequel?

wannabuy said...

Does that 'consumers' reference in CR have anything to do with the Pohl/Kornbluth 'Space Merchants?' Was your reference a sequel?
Probably a miss. It was Pohl's book. So you probably have the title right.

Got Popcorn?
Neil