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Frozen Ports in Long Beach, Singapore Mean Bleak 2010

GoFlyKiteNow

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Frozen Ports in Long Beach, Singapore Mean Bleak 2010

(Bloomberg) -- Chris Lytle, chief operating officer of the port of Long Beach, California, took in a panorama of the slumping world economy from his rooftop observation deck one day this month.

Shipping cranes stood still, truck traffic trickled and a cargo vessel sat idle, moored to a pier.

“You never see that,” Lytle said. “It’s quiet. Too quiet.”

Port traffic has slowed from North America to Europe and Asia as a recession erodes consumer demand and the credit crisis chokes off loans to export-dependent companies. International trade is set to fall by more than 2 percent next year, the most since the World Bank began measuring it in 1971. Idle ports around the globe are showing how quickly a collapse in trade can spread, undermining growth in each country it reaches.

September and October are typically Long Beach’s busiest months as U.S. retailers take deliveries for holiday sales. This year, imports fell 15.8 percent from a year earlier in September, 9.5 percent in October and 13.6 percent in November.

“Everybody expects 2009 to be a bleak year,” said Jim McKenna, chief executive officer of the Pacific Maritime Association, a San Francisco-based group representing dock employers at U.S. West Coast ports. “Now, it looks like 2010 is going to be just as bleak.”

Stockpiles

Coal is piling up at the Mozambique port of Maputo. Brazil’s exports of cars, household appliances, machinery and furniture fell in November from a year earlier. The port in Singapore, the world’s busiest for containers, posted its first month-over-month decline in seven years in November, at 1.5 percent.

Shipments to the port of Rotterdam, Europe’s largest, are likely to remain stagnant this year compared with 2007, said Jan Westerhoud, chief executive officer of Europe Container Terminals BV, the largest handler at the facility.

“The problem is that people can’t get financing, no matter what their credit situation,” said Ed Rice, president of the Coalition for Employment through Exports, which represents companies such as Boeing Co., Caterpillar Inc., United Parcel Service Inc. and BNP Paribas SA. “Banks are cancelling credit lines even for creditworthy customers.”

Shipping Rates Fall

The Baltic Dry Index, a measure of shipping costs for commodities, is down 93 percent from a record in May, a sign that traders expect export volumes to stay depressed.

Slowing trade is both a cause and an effect of the first simultaneous contraction in the world’s largest economies since World War II. Throughout this decade, trade grew by 12 percent a year to $13.6 trillion in 2007, propelling growth in nations from Germany to China and Chile. Now the evaporation of financing and collapse in demand threaten an activity that accounts for a quarter of the $54 trillion global economy.

“We are having this dramatic reversal,” said Michael Finger, a trade economist in Geneva since the early 1970s. “I’m a long time in this business, but this is unique.”

Governments and international lenders are stepping in to fill the gap. China and the U.S. pledged $20 billion to aid their exporters. The World Bank tripled funding for banks helping emerging-market companies to sell abroad, to $3 billion. South Korea pledged $16 billion for its exporters after banks there couldn’t secure international credit lines for them.

Stepped-Up Credit

“We are going to step up and provide credit to our exporters,” said Jeff Abramson, the U.S. Export-Import Bank’s executive vice president, in an interview. Without export finance, “the credit crisis can impact the real economy.”

In Germany, the world’s top exporter, trade abroad slipped 0.5 percent in October, the fourth drop in six months. In China, exports fell 2.2 percent in November, which was the first monthly decline in seven years. They decreased a record 26.7 percent in Japan last month from a year earlier. U.S. shipments fell 2.2 percent in October to the lowest level in seven months.

The banking crisis means access to trade credit is becoming scarce too. In recent months trade financing costs soared to more than six times pre-crisis levels, according to a Nov. 18 report by HSBC Holdings Plc.

“You take it for granted until it blows up,” said Bernard Hoekman, trade economist at the World Bank, in an interview. “Now it’s blowing up.”

Exporters worldwide are short $25 billion in trade financing that either isn’t available or costs too much, according to Pascal Lamy, the head of the World Trade Organization.

‘Deteriorated’

“The market for trade finance has severely deteriorated over the last six months, and particularly since September,” he said at a conference last month in Geneva.

Trade credit insurance, which protects sellers against losses and typically covers as much as 40 percent of trade in Europe and 5 percent in the U.S., is also harder to get.

Atradius NV, an Amsterdam-based insurer that covers about a third of global trade receivables, is raising prices by as much as 50 percent and reducing coverage on thousands of companies. That includes 12,000 in the U.K. and all the suppliers to the biggest U.S. automakers -- General Motors Corp., Ford Motor Co. and Chrysler LLC, owned by Cerberus Capital Management LP.

West Coast Ports

“We’ve taken a hard look at 50 percent of our coverage and changed our action on about half of it,” said Brett Halsey, the Baltimore-based director for Atradius’s contracts with U.S. companies.

At the adjacent ports of Long Beach and Los Angeles, together the largest in the U.S., trade has slowed about 10 percent this year, a record drop. In 2007, volumes slid for the first time in more than a quarter century.

One 140-acre tract at Long Beach is filled with more than 25,000 new Toyotas that dealers can’t sell. Toyota Motor Corp., the world’s second-largest automaker, yesterday forecast its first operating loss in 71 years on weak demand.

Nearby, scrap metal meant for export to Asia piles up behind a fence.

From the observation deck, Lytle pointed to piles of empty containers stacked four high and numbering in the thousands.

Some of the dockside cranes “haven’t turned a wheel in months,” he said.


-- With reporting by Alaric Nightingale in London and Diana Kinch in Rio de Janeiro. Editors: Steve Bailey, David Ellis.
 

longbow

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Go Fly Kite - do you know that this article is Dated Dec 23 2008

Oh what a difference a year makes.
 

GoFlyKiteNow

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Go Fly Kite - do you know that this article is Dated Dec 23 2008

Oh what a difference a year makes.

The writer is forecasting a trend for year 2010.

About shipping industry. Global shipping industry.
( Not about some individual's b'day party or wedding anniversary)

Transition periods / economic affairs of countries and their
trade / shipping patterns are not measured in days and months.
Even an year is too short a span and only mildly relevant.

Things have not improved at all in the shipping arena, as of date
 

zuoom

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forecasted trend for 2010.

as of now, late 2009 has things not improved? or has it been as per forecasted like late 2009/ early 2009?
 

GoFlyKiteNow

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forecasted trend for 2010.

as of now, late 2009 has things not improved? or has it been as per forecasted like late 2009/ early 2009?

Yesterday: The Baltic dry index and the baltic Dirty Index are both
70 % below the peak levels of 2008.
The forecast is on track in its correctness.
 

zuoom

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bdi.gif

http://investmenttools.com/futures/bdi_baltic_dry_index.htm

erm, i know nothing much about the BDI, but looking at it from a 3rd party POV. 2008 seems like a spike in figure. comparing it to early 2000s... 2008 looks like it was off the chart.
 

longbow

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Port activities are lagging indicators. Meaning economic recession starting second half 2008 to first half 2009 will be reflected in shipping activities for 2009. So this report in Dec 2008 will give an accurate reading for 2009. A recession in 2008 and 2009 means lousy trade in 2009.

Whether it is as accurate for 2010 is another matter. Right now we are more interested in 2010 on 2009 where everyone knows is a lousy year (although it has turned out not to be as bad as predicted).

However for Q4 2009 we are seeing economies coming out from recession, people are seeing that the world is still around, Goldman and MS is still standing (and paying our billions in bonuses). Confidence is coming back to the makets. Dow is not at 6K dropping but 10K.

It is silly to make a forward prediction into 2010. Look for the 2009 Dec report on how 2010 is going to be like.
 

longbow

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Here is a more recent article for 2010. Should be more accurate as it was written Dec 4 2009 vs Dec 2008.

Economist forecast revival of US port activity in 2010
4 December 2009

IHS Global Insight economist Paul Bingham said 02/2010 cargo container traffic may reach 973,872 20-foot containers, up 16% from 02/2008, and that for 03/2010 may reach 1.05 million containers up 5%. He said, “H2/2009 has continued to see declines from 2008’s levels but not as large as we saw during H1/2009. These less-than-bad numbers are evidence that the industry is seeing early signs of recovery.”

From 01/2009 to 10/2009, cargo container traffic at the Port of Los Angeles fell 15.4% and that at the Port of Long Beach fell 24%.

IHS Global Insight predicted that 2009 cargo container traffic is likely to fall 17% y/y, with a total volume of 12.7 million containers.

Intelligence reporting by Global Intelligence Alliance
 

longbow

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Baltic Index is a leading indicator however given that it was off the chart for 2008, it failed to predicted the suddeness of the financial meltdown (it is not supposed to be able to do that anyway).


yes..the bubble times..when oil was shooting past 150 usd a barrel.
 

longbow

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It is silly to compare "yesterday's" figures to 2008 peak level with oil as $150. When you do that you get the "70% below peak" which is not an accurate picture. Better to compare over a period of time.

Anyway since Baltic Index is a measurement of commodity, it makes sense that it is weak as only China is consuming. US and EU are both down. For a simple back of env look just look at car sales. Increase in Chinese car sales cannot make up for drop in car sales for US and EU.

After all cars contain a large portion of the commodities as per Baltic Index



Yesterday: The Baltic dry index and the baltic Dirty Index are both
70 % below the peak levels of 2008.
The forecast is on track in its correctness.
 

Gallego99

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.........................However for Q4 2009 we are seeing economies coming out from recession, people are seeing that the world is still around, Goldman and MS is still standing (and paying our billions in bonuses). Confidence is coming back to the makets. Dow is not at 6K dropping but 10K........

The man who has been there and seen it all. Dun read too much into the inflated index and assume that all is well.:smile:

http://www.businessinsider.com/volc...hat-the-feds-pouring-into-the-economy-2009-12
 

longbow

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Aiyah of course not saying that all is well.

The issue here is that if you looked at the global economy Dec 2008, given all the information at that time you would think that we are headed for a global depression with major US banks going under and bring down the world (imgaine failure of AIG would have dragged down MS and Goldman and SG and failure of Citi, BOA .....).

If you look at global economy Dec 2009 you can see that we are coming out of recession but growth in the future would be weak at most. Big difference bet global depression and weak growth.

I think one of the articles posted even predicted China have 0 growth for 2009 (they have a 9% growth rate)!

In this article, they are trying to project from 2008 into 2010 so how can be accurate, esp given the metrics that they were using Dec 2008).


The man who has been there and seen it all. Dun read too much into the inflated index and assume that all is well.:smile:

http://www.businessinsider.com/volc...hat-the-feds-pouring-into-the-economy-2009-12
 
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