Container Freight Rates Drop to Zero

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Global Trade

We reported some months ago about the fall in the Baltic Dry Index, the index that measures freight rates for bulk commodities like iron ore and grains. The BDI crashed 96% and though it is seen as a useful early indicator of global trade, it is notoriously volatile and as such should be looked at in light of other data before drawing too many conclusions.

Well according to the UK’s Telegraph newspaper, freight rates for general purpose shipping containers have followed the BDI down and effectively hit zero for the Asia-Europe route. In the words of Charles de Trenck, a broker at Transport Trackers in Hong Kong. “We have seen trade activity fall off a cliff. Asia-Europe is an unmitigated disaster.”

Trade data for exports from Asia to the USA and Europe have collapsed over recent weeks. Korean exports fell 30% in January compared to a year earlier. Taiwan fell 42% and Japan 27%. Even China has begun to see an outright contraction as sales of steel, electronics and textiles have slumped.

Apparently it’s not just western imports, exports have been hit too. Shipment from Long Beach and Los Angeles have currently fallen 18% year over year . Apparently idle ships are laid up outside Singapore and more could follow. Mr de Trenck believes where trade flows have traditionally risen by 8% year to year, 2009 could see a further drop of 7% to the USA and 9%, possibly 12% to Europe.

A welcome logistics saving if you are a buyer or seller with cargo to move.

–Stuart Burns

Comment (1)

  1. David Rae says:

    Stuart,

    I noticed that story, and at first glance it looks like a welcome boost for importers. However, a post on the UK’s Motley Fool user group raises another side of it.

    This post (http://boards.fool.co.uk/Message.asp?mid=11395983) from a steel importer claims that import fees are being increased in the country of import, with some of those fees being returned to agents in China, Korea etc…

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