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Sunday, July 18, 2010

The markets have tanked part 2

Excellent post made by a reader

quote

Anonymous has left a new comment on your post "The markets have tanked!":

I believe reduced congestion, particularly in Australia, earlier this month has also played a part.
"Newcastle's coal congestion in June had up to 61 ships waiting in queue.

The average waiting time for Newcastle's coal port, however, has improved. During the week of July 12, there were an average of 12 vessels waiting to load."

Data I've seen indicates Cape congestion down in the space of a week by 6Mdwt, consistent with the absurd reduction in Newcastle queues. That's equivalent to about 3 months worth of Cape deliveries in one swoop
 
Unqte
 
Yes this is an excellent point. Highlights a few things. Congestion has dropped dramatically in a relatively short period of time doesnt means that PORTS are any more efficient it means that there are less shipments being booked.
 
It also highlights the fact that the 'Markets' may have been so high for so long due in the main to something as inoccuous  as 'Infrastructure issues'.
 
We like to think freight rate are determined by the solid and sensible issues such as the world demand for Steel, or the amount of ships available to charter BUT essentially a massive determinant has been that port infrastructure, or the lack of it, has meant that despite roaring demand, our land based logistical systems have not been able to keep up. I guess this isnt too surprising. Infrastructure projects, by their very nature take years to develop. Plus when you consider that many of the worlds ports (and all of its seaways) are not controlled by private enterprise - then you can see how a spike in demand does not always translate well on the supply side.
 
So is there any good news?
 
YES - after 35 odd days of downward movement the BDI has moved back into positive territory. The dramitic fall has tacken its toll and firms have already moved into defensive mode.
 
Suddenly there is talk of hire freezes, counterparty risk and dare I say it "Economy Class" travel. Batten down the hatches. I expect a steady rise in the BDI and to settle around the 2500 mark...
 
Good time to train up and prepare for the next market rise

Everything happens for a reason
 
Cheers
VS

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