Shipping Rates Fall To Zero As Global Trade Collapses

How bad is the global recession? Charles de Trenck, a freight broker at Transport Trackers in Hong Kong says that container shipping rates in many cases have fallen to ZERO. “We have seen trade activity fall off a cliff. Asia-Europe is an unmitigated disaster.” Shipping journal Lloyd’s List reports that freight brokers in Singapore are now waiving fees for containers traveling from South China, charging only for the minimal “bunker” costs. Container fees from North Asia have dropped $200, taking them below operating cost.

The World Bank caused shockwaves with a warning last month that global trade may decline this year for the first time since the World War II. This appears increasingly certain with each new batch of data. I’ve been watching the Baltic Dry Index pretty closely. It tracks freight rates for bulk commodities such as iron ore and grains. It fell out of bed several months ago- dropping an incredible 96%. The BDI is a useful early economic indicator, but it’s volatile and can exaggerate ups and downs in trade. The latest phase of the shipping crisis, however, is different. It has spread to the core trade of finished industrial goods, which is the lifeblood of the global economy. Mr. de Trenck predicts Asian trade to the US will fall 7% this year. He estimates Asia to Europe to drop 9–12%. Global trade grows 8% in an average year.

He said it was “illogical” for shippers to offer zero rates, but they’re doing whatever they can to survive. Offering container slots for free is like an airline giving away empty seats for nothing, in the hope of making something from meals and fees. Not a recipe for long-term survival. Industry sources said they have never seen rates fall so low. “This is a whole new ball game,” said one trader.

Korea’s exports fell 30% in January compared to a year earlier. Exports have slumped 42% in Taiwan and 27% in Japan, according to the most recent monthly data. Even China has now started to see an outright contraction in shipments, led by steel, electronics and textiles.

A report by ING yesterday said shipping activity at US ports has suddenly dived. Outbound traffic from Long Beach and Los Angeles, America’s two top ports, has fallen by 18% year-over-year, a far more serious decline than anything seen in recent recessions.

“This is no regular cycle slowdown, but a complete collapse in foreign demand.” said Lindsay Coburn, ING’s trade consultant. He says that idle ships are now stretched in rows outside Singapore’s harbor, creating an eerie silhouette like a vast naval fleet at anchor. Countries around the globe are trying to bail out their own economies just like the U.S. It’s not working anywhere else, either.

source: UK Telegraph

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