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Shipping Costs Rise To Record On Chinese Demand

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Baltic Dry Index. Much posted before.

http://investmenttools.com/futures/bdi_baltic_dry_index.htm

http://www.ft.com/cms/s/d5448e54-4378-11dc...00779fd2ac.html

Shipping costs rise on Chinese demand

By Javier Blas in London

Published: August 5 2007 18:48 | Last updated: August 5 2007 18:48

The cost of shipping dry bulk commodities, such as coal, iron ore and cereals, has surged to a new high boosted by strong demand, port congestion and a significant lengthening of trade routes.

The Baltic Dry Index, the best gauge of the world’s dry bulk shipping costs, last week rose above 7,000 points for the first time – an increase of 103 per cent in the past year. The index, which closed at 7,007 on Friday, has jumped almost fivefold since 2000.

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The sharp increase threatens to add to already rising prices for agriculture, base metals and ore commodities.

Although analysts anticipate some price easing, they predict that freight costs will remain high.

As trade routes expand, vessels are spending longer sailing from more distant ports, reducing the capacity available at any time and pressuring prices, according to shipbrokers.

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So not only are the price of commodities rising top record levels but the cost of moving them is also. Inflationary pressures are building all the time. sooner or later... The inflation figurs come out this week don't they?

Edited by FTBagain

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not sure i understand, does this mean the cost of imported goods is going up?

This might be interesteing for the long term, if importing gets more and moer expensive it will become more viable for Brits to start producing again. A good or bad thing?

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not sure i understand, does this mean the cost of imported goods is going up?

This might be interesteing for the long term, if importing gets more and moer expensive it will become more viable for Brits to start producing again. A good or bad thing?

Yes, at least the bulk dry goods. Should think container rates are not wholly isolated from changes in other parts of the market.

Current index 8410.

Last years "spike" well and truly smashed though.

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It will presumably increase the cost both of imported goods to Britain, and to British manufacturers who export theirs.

Read somewhere ages ago that these things take about 2years to build and cost shedloads, so it would be difficult to just increase shipping supply overnight.

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not sure i understand, does this mean the cost of imported goods is going up?

This might be interesteing for the long term, if importing gets more and moer expensive it will become more viable for Brits to start producing again. A good or bad thing?

It would be a good thing, but like you say "long term", as companies may have contracts that have to play out, as well as setting up in the UK to start producing again. Certainly a good thing for jobs if it happened, but not inflation in the UK.

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Yes, at least the bulk dry goods. Should think container rates are not wholly isolated from changes in other parts of the market.

Current index 8410.

Last years "spike" well and truly smashed though.

Somethin odd about this to my mind. Isn't most of the world sea freight is now owned by Chinese companies (and most major port companies)...surely by raising prices they will just squeeze their own producers? Surely they have seen the growth charts and have planned to up-scale their operations in advance? I find it hard to think they have caught out by excessive demand....but that is soon to drop when the US consumer can't afford anything.

Or is it perhaps to do with the world grain shortages? Normally most continents are self sufficient...but this years' poor harvest means many bulk carriers are being put into service for grain? :blink:

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not sure i understand, does this mean the cost of imported goods is going up?

This might be interesteing for the long term, if importing gets more and moer expensive it will become more viable for Brits to start producing again. A good or bad thing?

BAD THING - WHO WANTS MORE AUSTIN ALLEGROS?

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Somethin odd about this to my mind. Isn't most of the world sea freight is now owned by Chinese companies (and most major port companies)...surely by raising prices they will just squeeze their own producers? Surely they have seen the growth charts and have planned to up-scale their operations in advance? I find it hard to think they have caught out by excessive demand....but that is soon to drop when the US consumer can't afford anything.

Or is it perhaps to do with the world grain shortages? Normally most continents are self sufficient...but this years' poor harvest means many bulk carriers are being put into service for grain? :blink:

No, no,no - they (and Vietnam) build the ships. The Greeks have got the oil tanker marker sewn up. One of the biggest companies in the world (and to which most people have not heard of) is AP Moller-Maersk. They are very big in container/maritime transport and where are they based? No? Denmark!!!

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Slightly off topic but just watched the boss of a haulage firm on ITV News moaning about the impending rise in fuel duty.

He explained it very well ... it cost him x ... he had to pass x on to whoever the recipient was ... and you guessed it ... :huh::huh::huh:

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Insane figures.

Is the Chinese economy the new paradigm or are they just experiencing a slightly different form of the bubble madness that has been infecting property prices in the West ?

Not just China, the rest of Asia as well. As more and more gets produced in Asia even more demand will be created for shiping other goods to the consumers on the other side of the world.

Simply not enough supply to go around, takes a long time to build a ship.

Similar happening in container shipping.

http://transportintelligence.com/briefs/ex...ly-chains/1015/

Exploding shipping demand threatens global supply chains

23/Oct/2006

Exploding demand in the container shipping sector is threatening to put a break on the globalisation of supply chains as marine transport infrastructure fails to keep pace. This is the suggestion of a new report from the respected shipping consultants Drewry's, in their annual report on the world's container ports published last week.

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Not just China, the rest of Asia as well. As more and more gets produced in Asia even more demand will be created for shiping other goods to the consumers on the other side of the world.

Simply not enough supply to go around, takes a long time to build a ship.

Similar happening in container shipping.

http://transportintelligence.com/briefs/ex...ly-chains/1015/

Exploding shipping demand threatens global supply chains

23/Oct/2006

Exploding demand in the container shipping sector is threatening to put a break on the globalisation of supply chains as marine transport infrastructure fails to keep pace. This is the suggestion of a new report from the respected shipping consultants Drewry's, in their annual report on the world's container ports published last week.

I know not many ships were being built in the 1980s so the worlds merchant marine was getting pretty old and decrepit by the end of the millennium. There was also a safety issue with the design of certain ships which meant they had to be taken out of service. Even so the graph for shipping prices is crazy. These figures together with some data I have been reading about Chinese inflation suggests that the Asian boom is running out of control. To my jaundiced eye this looks like another spectacular bust in the making, although we might have to wait 12-18 months before it unravels.

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I know not many ships were being built in the 1980s so the worlds merchant marine was getting pretty old and decrepit by the end of the millennium. There was also a safety issue with the design of certain ships which meant they had to be taken out of service. Even so the graph for shipping prices is crazy. These figures together with some data I have been reading about Chinese inflation suggests that the Asian boom is running out of control. To my jaundiced eye this looks like another spectacular bust in the making, although we might have to wait 12-18 months before it unravels.

I'd agree with that. I was in Sarawak and KL earlier this year. The amount of house, shop-house and apartment building going on was absolutely phenomenal. 80-90% of the cars on the road are under five years old. Prices in some areas were beginning to look totally daft (550K RM$ equivalent to around £80K for a new build terrace like place - missus bought hers for around 20% of this 15 years ago).

And there was already some sign it was going to turn. An estate downwind of pig and crocodile farms was practically unsold and those real estate signs fade real quickly under tropical sun and regular downpours!

Great approach to inflation though. A lot of the government staff had just had massive pay rises so the shopkeepers were increasing the price of Milo accordingly. Cue lots of naming and shaming in the local press complete with inspection visits by government officials.

Edited by greencat

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I work with shipping lines, and the way containers are priced includes a variable part for the fuel (BAF) which constantly moves. Recently, the first time in 4 years, the actual cost of the freight went up. Up until now everything else has been moving, such as fuel and currency exchanges (CAF) and the haulage to the docks.

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Hmmm.....

Yesterday, the benchmark Baltic Dry Freight Index, which tracks daily charter rates for dry bulk ships, broke through 10,000 for the first time, closing at 10,218. It is 150pc higher than a year ago and has almost doubled since June

One London broker said the price of the biggest ships had risen to $227,000 (£112,000) a day compared with $137,000 as recently as August. He said a similar charter a year ago would have cost as little as $60,000 a day

So, a quadrupling of costs in a year, a 65+% increase in the last 2 months, and China are exporting inflation.

Yet the CPI is still 1.8% - it's a miracle I tells ya!

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the company i work for builds, operates and manages cargo ships

it doesnt take that long to build a vessel. the chinese can churn out a 1000 teu contaniership in no time

this boom is unprecedented, like no other seen before it. but the wise ones know it is cyclical and they are expecting the crash to come in 2009 sometime. i believe that those who will get really hurt are the companies building these huge 12,000 teu contships (like Maersk) and the greeks who have invested heavily in supertankers

the operators who have a more evenly distributed exposure will do much better during the coming bust

despite this they are still building like crazy, the whole industry is in a frenzy. to give you some idea, we will take delivery of 103 vessels between now and 2011

and where will the crew come from to work all these ships ? only God knows. we already have an acute shortage of qualified officers. salaries are going through the roof as there are not enough crewmembers to go around

it truly is an interesting time

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