Is that it? – not only the Baltic Dry is soaring lately…


Not too long ago I published a post on the Baltic Dry Index (BDIY) not being a (leading) crisis indicator – on that day, the BDIY stood at 293 points. On 10 February 2016 it finally reached its lows – with 290 points. However, since then, the BDIY has started an astonishing recovery. Yesterday, it reached 332 Points, hence, a startling 42 points since its overall low – more than 10% in less than three weeks. Also, the BDIY acted (and still acts) in synchronicity with the recovery in the equity-markets, e. g. the German DAX, which had its low on 11 February 2016 with 8,752 points and from there started its recovery to 9,717 points on 1 March 2016. So, is the year-start depression over – and were I proved wrong and the BDIY is at least a  recovery indicator this time?  Recent German unemployment statistics as well as a slightly rising oil-price (to name only two positive messages of the last days) also seem to underpin the impression of a recovery from the bad start into 2016.

I would be very careful, though, with such an assumpion: First, the Shanghai Containerized Freight Index (SCFI) which also records prices for freight transport is still on a declining curve. Secondly, the BDIY might currently be distorted according to a post on Businessinsider due to a record scrapping-acitivity not seen since 1986. As Zerohedge, refering to a Deutsche Bank report, points out, the scrapping does not really offset incoming new ships. While according to Tim Worstall Zerohedge’s preview as to a coming meltdown in global trade should not be taken too seriously, experts seem to agree that only an increased scrapping activity will save the day for freight-rates. To sum it up: AT LEAST, shipbuilders were over-estimating future growth-rate for the world economy – and not only by a smal margin….

Secondly, when looking into other „fundamentals“, like e. g. China – the mess seems to get bigger not better:  Chinese government is said to plan the layoff of 1.8m to 6m of its workforce within the next three years, especially in the coal and steel industry thereby reducing the capacity and trying to „kill“ zombie-companies. Also, trade activity to and from China largely disappointed in January. Furthermore, due to the credit-frenzy of the last months, China’s credit rating seems to be endangered. Although the repercussions of these developments are not thought through yet, it is clear, that probably the Chinese government also overestimated Chines economy’s growth rate by a comfortable margin…

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