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Friday, 06 March 15
BALTIC DRY INDEX: IS THIS POWERFUL INDICATOR SIGNALING A GLOBAL RECESSION? - STREET AUTHORITY
 Although memories of the Great Recession linger, a case can be made that better days lie ahead.
That’s because central banks around the world are pursuing bold stimulus measures. And the United States is looking solid enough for the Federal Reserve to contemplate its first interest rate hike in nearly a decade.
Moreover, gas prices have fallen sharply, which aids consumers, and the stock market is way up, having nearly tripled from recession lows.
But this is no time for investor complacency: indeed a key economic indicator suggests trouble may be brewing just beneath the surface.
The index in question: the Baltic Dry Index.
As a composite measure of worldwide daily shipping prices for commodities like iron ore, steel, cement and coal, the BDI provides insight into manufacturer demand for the raw materials that, literally and figuratively, form the foundation of the global economy.
Typically, a rising BDI coincides with stronger demand from producers, who’ll need raw materials to generate energy and manufacture a variety of things, from roads and bridges to cars and machinery.
This is what makes the BDI such a compelling indicator. It provides information about core economic activity that has yet to take place.
The thing is, the BDI crashed from 2013 highs and now sits around 30-year lows.
The sheer magnitude of the decline should grab every investor’s attention.
My colleague Dave Sterman recently expressed concerns of the growing likelihood of financial distress for dry bulk shippers , which has broad domestic implications, but I am equally concerned about what it means for the global economy.
While the plunge doesn’t necessarily portend a market crash, know that the BDI has shown persuasive correlations with severe market downturns before. It happened in 1999, just ahead of the 2000 dot-com bust. And in 2008, the BDI plunged a stunning 90% in less than half a year. That move occurred soon before the 2008 stock market rout was fully underway.
If the BDI was able to forecast the worst of the past two market crashes, might the current plunge also signify trouble ahead?
I think it may… but with a caveat.
As Dave Sterman recently noted, “Dry bulk shippers ordered a lot of new ships in 2013, many of which started plying the waters in the past 12 months.” In fact, the industry’s new ship orders more than tripled to 947 in 2013, from 267 the year before, because coal imports were expected to rise dramatically.
When the big increase didn’t occur, the shipping industry was left with a major oversupply problem — “too many ships chasing too little market action,” as David puts it. The oversupply has triggered aggressive, industrywide shipping price cuts. For example, the average daily capesize rate, the charge for ships that carry up to 150,000 metric tons of cargo, is now around $6,600, compared with as much as $20,000 per day a year-and-a-half ago.
A similar trend is underway in the oil industry. There, too, crashing prices have much to do with a supply glut (brought on mainly by soaring U.S. production), and the glut makes it harder to tell how much of the crash is due to falling demand. This dilutes oil’s value as a leading economic indicator.
Because of the shipping glut, something similar is probably happening with the BDI.
That said, the BDI’s plunge is likely giving a strong signal about the demand side of the equation. By now, most investors are well aware of the many drags on demand for commodities. European and Japanese economies are in turmoil, a recession is underway in Russia and Canada and Australia may also be entering into recession.
Many analysts consider China to be the single-biggest factor in weakening raw materials, simply because its economy is now so large. No country buys as much iron ore as China, yet its imports of the commodity are only expected to rise 7.5% this year, the slowest pace of growth in five years.
So despite the large supply component that’s in play, I still think the BDI has an important message about the global economy. It’s probably not signaling the dire economic conditions a 30-year low might suggest, but investors should be prepared for the possibility of the global economy slowing down and perhaps even slipping dangerously close to recession.
Risks To Consider: If I’m right in my assessment of the BDI, then investors could be greatly underestimating the risk of serious losses in stocks, bonds and other financial assets .
Action To Take –> Besides being a useful economic indicator, the BDI has implications for the overall dry bulk shipping industry. It’s a very tumultuous and tricky place to invest right now, so investors thinking of braving the space should re-visit Dave Sterman’s industry analysis. The piece provides a detailed overview and level-headed investment approach. In the meantime, investors should think carefully about the broader ramifications of current BDI readings and consider paring their exposure to riskier assets, particularly stocks.
Source: Street Authority | Hellenic Shipping News
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Friday, 30 January 15
CAN BULKER CONVERSIONS SPOIL THE TANKER MARKET'S PARTY? - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Oversupply of tonnage has always been in the back of the head of ship owners when it comes to taking advantage of favorable market conditions. As s ...
Thursday, 29 January 15
CHINA ENERGY DEMAND MUST BE REVIEWED DUE TO FUNDAMENTAL ECONOMIC CHANGES - WOOD MACKENZIE
New patterns emerging as energy demand growth decoupled significantly from GDP growth for the first time in 2014
Wood Mackenzie says 2014 was ...
Thursday, 29 January 15
CAPE MARKET IS STILL STRUGGLING WITH LOW DEMAND AND LOW COMMODITY PRICES
Handy
Supramax rates are heading south with slipping rates all across the block. USG activity is slow with mid-week levels in the mid 8.000s, Fea ...
Wednesday, 28 January 15
MARKET INSIGHT - STELIOS KOLLINTZAS
With most traders having returned to action from year end festivities, we have already seen signs of activity in the specialized product markets. L ...
Wednesday, 28 January 15
CAPES CONTINUED THEIR UPWARD MOVEMENT LAST WEEK - INTERMODAL
COALspot.com: The Dry Bulk market displayed a mirror performance of that of the week prior, with the Capesize market correcting further upwards and ...
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- Madhucon Powers Ltd - India
- Goldman Sachs - Singapore
- Cigading International Bulk Terminal - Indonesia
- Videocon Industries ltd - India
- Timah Investasi Mineral - Indoneisa
- PowerSource Philippines DevCo
- Simpson Spence & Young - Indonesia
- The Treasury - Australian Government
- Romanian Commodities Exchange
- OPG Power Generation Pvt Ltd - India
- Australian Commodity Traders Exchange
- Manunggal Multi Energi - Indonesia
- Chettinad Cement Corporation Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sakthi Sugars Limited - India
- Ministry of Mines - Canada
- Power Finance Corporation Ltd., India
- Indian Oil Corporation Limited
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- Siam City Cement PLC, Thailand
- Indo Tambangraya Megah - Indonesia
- Agrawal Coal Company - India
- Thai Mozambique Logistica
- Indika Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- Dalmia Cement Bharat India
- Coalindo Energy - Indonesia
- European Bulk Services B.V. - Netherlands
- Billiton Holdings Pty Ltd - Australia
- Vedanta Resources Plc - India
- IEA Clean Coal Centre - UK
- Energy Link Ltd, New Zealand
- Lanco Infratech Ltd - India
- SMG Consultants - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Wilmar Investment Holdings
- San Jose City I Power Corp, Philippines
- Banpu Public Company Limited - Thailand
- AsiaOL BioFuels Corp., Philippines
- Mercuria Energy - Indonesia
- Baramulti Group, Indonesia
- Holcim Trading Pte Ltd - Singapore
- Intertek Mineral Services - Indonesia
- Globalindo Alam Lestari - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- SMC Global Power, Philippines
- Independent Power Producers Association of India
- Latin American Coal - Colombia
- Formosa Plastics Group - Taiwan
- ICICI Bank Limited - India
- Malabar Cements Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Therma Luzon, Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Africa Commodities Group - South Africa
- Straits Asia Resources Limited - Singapore
- Gujarat Sidhee Cement - India
- Posco Energy - South Korea
- Asmin Koalindo Tuhup - Indonesia
- Rio Tinto Coal - Australia
- Coastal Gujarat Power Limited - India
- Global Coal Blending Company Limited - Australia
- The State Trading Corporation of India Ltd
- Bhoruka Overseas - Indonesia
- Directorate Of Revenue Intelligence - India
- Riau Bara Harum - Indonesia
- Eastern Energy - Thailand
- Eastern Coal Council - USA
- Mercator Lines Limited - India
- Minerals Council of Australia
- Global Green Power PLC Corporation, Philippines
- Meralco Power Generation, Philippines
- Heidelberg Cement - Germany
- Standard Chartered Bank - UAE
- Ministry of Finance - Indonesia
- Bukit Baiduri Energy - Indonesia
- Thiess Contractors Indonesia
- Aditya Birla Group - India
- Krishnapatnam Port Company Ltd. - India
- Bulk Trading Sa - Switzerland
- Makarim & Taira - Indonesia
- Metalloyd Limited - United Kingdom
- Renaissance Capital - South Africa
- GVK Power & Infra Limited - India
- Cement Manufacturers Association - India
- Pipit Mutiara Jaya. PT, Indonesia
- Sindya Power Generating Company Private Ltd
- Mjunction Services Limited - India
- Singapore Mercantile Exchange
- Petron Corporation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Semirara Mining Corp, Philippines
- Star Paper Mills Limited - India
- Ceylon Electricity Board - Sri Lanka
- Bukit Asam (Persero) Tbk - Indonesia
- Altura Mining Limited, Indonesia
- Bharathi Cement Corporation - India
- Neyveli Lignite Corporation Ltd, - India
- Orica Australia Pty. Ltd.
- Gujarat Electricity Regulatory Commission - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ind-Barath Power Infra Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Sinarmas Energy and Mining - Indonesia
- Central Electricity Authority - India
- Price Waterhouse Coopers - Russia
- Grasim Industreis Ltd - India
- Borneo Indobara - Indonesia
- CNBM International Corporation - China
- Kaltim Prima Coal - Indonesia
- Antam Resourcindo - Indonesia
- Trasteel International SA, Italy
- Central Java Power - Indonesia
- Barasentosa Lestari - Indonesia
- Anglo American - United Kingdom
- Port Waratah Coal Services - Australia
- Kobexindo Tractors - Indoneisa
- New Zealand Coal & Carbon
- Oldendorff Carriers - Singapore
- Bhatia International Limited - India
- VISA Power Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Tamil Nadu electricity Board
- Attock Cement Pakistan Limited
- Indonesian Coal Mining Association
- Salva Resources Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- International Coal Ventures Pvt Ltd - India
- McConnell Dowell - Australia
- Coal and Oil Company - UAE
- Ministry of Transport, Egypt
- Maheswari Brothers Coal Limited - India
- South Luzon Thermal Energy Corporation
- Tata Chemicals Ltd - India
- Edison Trading Spa - Italy
- Parliament of New Zealand
- Mintek Dendrill Indonesia
- Siam City Cement - Thailand
- Maharashtra Electricity Regulatory Commission - India
- Larsen & Toubro Limited - India
- White Energy Company Limited
- Kepco SPC Power Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Chamber of Mines of South Africa
- Petrochimia International Co. Ltd.- Taiwan
- GAC Shipping (India) Pvt Ltd
- Wood Mackenzie - Singapore
- Global Business Power Corporation, Philippines
- TeaM Sual Corporation - Philippines
- ASAPP Information Group - India
- Kumho Petrochemical, South Korea
- Iligan Light & Power Inc, Philippines
- Toyota Tsusho Corporation, Japan
- LBH Netherlands Bv - Netherlands
- Australian Coal Association
- Bangladesh Power Developement Board
- Binh Thuan Hamico - Vietnam
- Deloitte Consulting - India
- Xindia Steels Limited - India
- Electricity Generating Authority of Thailand
- PNOC Exploration Corporation - Philippines
- Ambuja Cements Ltd - India
- Parry Sugars Refinery, India
- Meenaskhi Energy Private Limited - India
- Rashtriya Ispat Nigam Limited - India
- Interocean Group of Companies - India
- Economic Council, Georgia
- Sojitz Corporation - Japan
- Directorate General of MIneral and Coal - Indonesia
- Vizag Seaport Private Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- London Commodity Brokers - England
- Sarangani Energy Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- Medco Energi Mining Internasional
- Bhushan Steel Limited - India
- Karaikal Port Pvt Ltd - India
- Georgia Ports Authority, United States
- Kartika Selabumi Mining - Indonesia
- Jaiprakash Power Ventures ltd
- Pendopo Energi Batubara - Indonesia
- Electricity Authority, New Zealand
- Kalimantan Lumbung Energi - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Karbindo Abesyapradhi - Indoneisa
- Carbofer General Trading SA - India
- Planning Commission, India
- Aboitiz Power Corporation - Philippines
- Alfred C Toepfer International GmbH - Germany
- Samtan Co., Ltd - South Korea
- IHS Mccloskey Coal Group - USA
- The University of Queensland
- India Bulls Power Limited - India
- Jindal Steel & Power Ltd - India
- Orica Mining Services - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kideco Jaya Agung - Indonesia
- Savvy Resources Ltd - HongKong
- Essar Steel Hazira Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indian Energy Exchange, India
- Marubeni Corporation - India
- Energy Development Corp, Philippines
- Uttam Galva Steels Limited - India
- Bukit Makmur.PT - Indonesia
- CIMB Investment Bank - Malaysia
- SN Aboitiz Power Inc, Philippines
- Merrill Lynch Commodities Europe
- GMR Energy Limited - India
- Indogreen Group - Indonesia
- PTC India Limited - India
- MS Steel International - UAE
- TNB Fuel Sdn Bhd - Malaysia
- Commonwealth Bank - Australia
- Sical Logistics Limited - India
- Semirara Mining and Power Corporation, Philippines
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