Skip to comments.Key China box index drops for first time since June [Container shipping]
Posted on 10/24/2009 7:54:45 PM PDT by Vince Ferrer
Alarm bells are ringing for liner firms as one of the most accurate gauges of the container index fell for the first time in more than four months Friday. The China Containerised Freight Index, operated by the Shanghai Shipping Index, dropped for the first time since early June today. Despite lines reporting increased volumes and some being successful with rate increases this news will be a hammer blow for the industry. The CCFI takes data from the leading 20 lines operating out of China. Its numbers have been consistently in line with the fortunes of the container sector over the years, especially since China accounts for one in two boxes moved. With container shipping often a precursor of the world economy, the drop in the CCFI has some analysts suggesting the global economy could be in for a nasty double dip recession.
I believe the dip in this article is the first indication that shippers will not ship as much cargo with the new, higher rates, and will reduce their volume, once again leaving carriers below break even. If this is true, expect carriers to start dropping next year, beginning with the ship charterers.
And the good that aren’t going to market? Who makes money off of them?
Are they not moving because of shipping costs, or because of lack of orders?
Two months to the day before Christmas and Chinese crap is staying in China? That can’t be good.
For the most part, they are not moving because retailers here have severely cut back on their inventories, even into the Christmas season. Smartly, I might add. But there are probably some things shipped that are marginal and depend on the price of shipping. Those may be left on shore at the new rates.
Part of this might be good. Couldn’t it be from US manufacturers making more goods because it’s cheaper here now?
“I believe the dip in this article is the first indication that shippers will not ship as much cargo with the new, higher rates, and will reduce their volume, once again leaving carriers below break even.”
Freight is generally freight only because somebody bought the freight, and needs it at another location to reap the benefits of that freight.
I am in doubt the “shippers” would refuse the sale of product, therefore am wondering what you think the shippers will do with that freight if they don’t ship it via Containership?
Wouldn’t the Chinese crap for Christmas already be in US warehouses by now?
Maybe China products are being used locally.
I noted here on FR, that on my last cruise through the Panama Canal, almost all the ship we passed in the Canal and shipping lanes were riding high in the water.
Perhaps. In the 70's and 80's certainly. But today we have that most dangerous of business styles, Just-In-Time shipping. Retailers sometimes call this Ship-to-Shelf. Everyone wants to hold (and pay for) zero inventory.
Christmas toys normally wouldn't be scheduled for delivery much before Thanksgiving.
IOW, they'd be on a slow boat from China right now and they ain't...
For example, a 40 foot container full of computer equipment might have a value of several hundred thousand dollars. If the cost of shipping this container to go from $500 to $1500, the shipping cost per unit of the product is almost negligible, and I can't see the volume neing affected by shipping price alone.
However, there are commodity type products which would be more sensitive to price, like say 50lbs bags of rice. Raise the shipping rates high enough on a commodity which can easily be sourced locally, and the shipping will become uneconomical.
Even more sensitive to shipping costs would be extreme low value items like recycled cardboard or old cell phones. Previous to the crash, these were sent to China from the U.S., but the prices for recycled cardboard and other items crashed along with the economy. If it costs too much to ship, versus putting it in a landfill here, we'll just bury it.
Yes it is, which is why I have been posting on the subject for the last year. Container shipping is probably the least fakeable indicator of consumer behavior, rather than the Dow Jones Industrial Average, or some other index. What container shipping tells us is that we have an L shaped recovery. To me an L shaped recovery isn’t even a recovery, its just a reset down to a lower level. shipping has been down a consistent 25% this year over last.
The worlds largest container shipping line, Maersk Line, have replaced some of their larger container ships with smaller container capacity ships!!!
My container rates are 1/2 of what they were in 2007, running about $1 per cube. As for doubling...didn’t happen. There was a $500 surcharge added late summer that has now been removed.
These freight rates have allowed us to drop our prices dramatically, however the lack of retail traffic has caused things to be flat. It’s great to have the low rates, but when it’s not heading to the retail floors all I end up with is a warehouse full of product “with a great freight rate”...try putting that in your checking account.
I read on FR that a large amount of container ships are parked already.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.