The Baltic Dry Index, which tracks ships rates for vessels transporting dry commodities, continues to mount an impressive comeback after its massive crash in October 2008. On Friday the index rose 2.68 per cent to 2,225 points, its highest rate this year.
The key question though is whether the gains, appearing steadily over the last month (see chart below) can be maintained for the longer-term. This is especially the case since reports suggest the recent pickup in Chinese steel production could be compromised by falling steel prices. According to Standard Chartered much of the recent price weakness here stems from deteriorating demand in major regions including North America, Europe, and Asia.
As Reuters reports:
…benchmark steel prices in China have fallen by 13 per cent from February after mills increased output on expectation of demand coming from the government’s 4 trillion yuan ($585 billion) stimulus package.
Lloyd’s List, meanwhile, reports Chinese ports are already preparing for a major contraction in activity this year, especially in container shipping:
Cargo figures already show a very sharp contraction in port throughput in the final weeks of 2008, with the grim performance figures continuing into the first two months of 2009. Some ports in southern China saw volumes plunge by a third, with no relief in sight.
“The worst is yet to come,” China Merchants chairman and managing director Fu Yuning warned last week. After years of sensational growth figures, Chinese ports will be lucky to see any net increase at all in 2009. China Merchants is provisionally forecasting nationwide throughput of 129m teu, unchanged from 2008. But the figure could well be negative, Dr Fu said in a speech to the Trans-Pacific Maritime conference.
That would be the first time that container volumes have remained the same, or even fallen, year-on year, he said. Hope is now being pinned on China’s massive stimulus package, which is being put in place at high speed as the government responds to the crisis of 20m unemployed migrant workers. The one slightly encouraging development was an improvement in the number of loaded containers moved in the latter half of February, Dr Fu told delegates. And by 2010, he thinks the worst may be over.
Related links:
Baltic dry index – the quick march – FT Alphaville
Chinese ports brace for bleak year ahead – Lloyd’s List