Is there a sign that the shipping news is about to get gloomy?
The Baltic Dry index, as we’ve previously noted, has had a stellar year, surging over 10,000, on the back of an infrastructure squeeze in the sector.
That, notes the Capital Chronicle blog, prompted speculation that there existed here an opportunity in the scramble to finance and build new ships.
On the back of Chinese demand, financing volumes have stayed high, a stream of Chinese shipbuilders are (perhaps worryingly) plotting floats, and the drive to build fleet sizes has resulted in record ship prices, says RJH Adams at the blog:
There comes a point where ship buyers have to judge whether freight rates, and the outlook for freight rates, can justify these prices. Sustained by the China and India demand stories they evidently judge that they still can; and in this they are succoured by the q4 seasonal surge in transport prices, typically driven by heating oil demand.
But he sees a risk – the generalised flight to government paper tells against the China/India decoupling hypothesis on which the shipping thesis is based.
10 year US constant maturity rates typically relate positively to the BDI with a lag of 3 to 6 months. There is currently a sharp divergence from this trend which, time will tell, either supports the prevailing shipping enthusiasm for decoupling or may come to be seen as the proverbial warning shot to the head.
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