Wednesday, May 27, 2009

bringing it to an eight month high after its disastrous collapse at the end of 2008.

TO BE NOTED: From Alphaville:

Eight-month high for the Baltic Dry

The Baltic Dry index - a benchmark measure of dry shipping rates and thus global trade - rose 7.55 per cent today, bringing it to an eight month high after its disastrous collapse at the end of 2008.

Over May alone, the index has risen 77 per cent.

Baltic dry
The Baltic Capesize - which tracks shipping costs for larger vessels - has also surged of late. Over May, it has risen 125 per cent.
Baltic capesize
All of which would seem to tally rather neatly with the implication behind Bloomberg’s chart of the day yesterday (HT Paul Kedrosky) - an index of the net long position in US commodities futures. The huge rise in net long positions on US commodity futures supposedly being an indicator that…… Hedge funds are making the biggest bet in nine months that commodity prices will rise as the global economy rebounds from its steepest slump since World War II.A slightly more nuanced investment riff on which has been the preponderance of shipping-focussed distressed debt funds set up by banks in the past couple of months.

Not that any of that need necessarily spell recovery.

It’s widely accepted that massive Honda Effect destocking has taken place over the past few months, which explains the swiftness of the collapse in shipping rates. Now that stocks have been adequately run down, production will start to ramp up again, and with it, shipping. And while that will provide a significant initial fillip to shipping rates, it won’t necessarily lift them anywhere near their eighteen month highs. For that, an actual economic recovery would be rather necessary. With global GDP shrinking at its fastest rate since the second world war, that ain’t on the horizon.

Related links:
How not to (mis)read the Baltic Dry
- FT Alphaville
The Baltic Dry marches on (for now)
- FT Alphaville

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