How this squeeze plays out is crucial. Probably a murky blend of some squeezed margins, and some cost pass through to consumers? I'm going to listen to some company calls, and would hope others here might contribute same on this issue?
The Chinese too ought to be squeezed by raw and intermediate goods prices now. Once they revalue the yuan, all that price structure change will need to be passed on to US consumers, in one big inflationary jolt.
More squeeze news. I think this shipping bottleneck is the primary reason oil imports into the US have been so poor, and crude inventories are now at such dangerously low levels. Nearby oil futures this AM:
Crude Oil(NYM)(Access) Feb 35.18 +0.68 1/15/2004 4:25
Food train wreck watch: no rain in the Rio Plata soybean region in last twenty four houes.
Reuters
No end in sight for soaring raw goods freight rates
Thursday January 15, 6:32 am ET
By Stefano Ambrogi
LONDON, Jan 15 (Reuters) - Global freight costs for key raw materials, smashing records on a weekly basis, are set to power even higher as charterers grapple with fresh surges in demand and a worldwide shortage of vessels, brokers and analysts said.
The Baltic Dry Index, a barometer of the dry-bulk freight market for important commodities such as iron ore, grain and coal, closed at over 5,000 for the first time ever last week and ended another 68 points up at 5,459 on Wednesday.
China's voracious demand for raw materials, particularly for iron ore and latterly coal as the world's most populous country wrestles with power shortages, has fuelled the enormous demand for Capesize ships, vessels in excess of 80,000 deadweight tonnes in size.
That surging demand for transportation, combined with the global economic recovery, has spilled into smaller dry-bulk ship sectors associated with hauling grains and sugar, as importers scramble to hire anything capable of moving the goods, brokers said.
According to United Nations figures, close to 95 percent of the world's trade is transported by sea.
J.E. Hyde shipping brokers and analysts this week said front-haul time charter levels have increased by $20,000 daily in the last week alone.
"It is pretty astonishing. You only see this once in a lifetime -- once in two lifetimes," said Nick Collins a broker with Clarksons shipbrokers in London.
"Freight will, in general, continue to climb in all sectors in the short to medium term," he said, pointing to a global ship supply crunch.
Tom Cutler of Clarksons has said that the growth of the world's bulk carrier fleet at around four percent a year is not going to keep up with booming demand.
An average trip to haul coal or iron ore from a European terminal to Asia on a Capesize vessel is averaging over $100,000 a day, Collins said.
The Panamax sector, 55,000 to 80,000 deadweight tonne ships, has leaped to similarly stratospheric levels.
The key U.S. Gulf to Japan route for hauling grains is averaging more than $58 a tonne, up from $47 a tonne in October.
European to Asian voyages for Panamaxes are asking upwards of $45,000 a day, while in the Pacific southeast Asia short-haul trips are averaging $46,000 a day.
Panamax bulk vessels working transatlantic voyages are now demanding more than $40,000 per day -- a major rise on last week's rates which averaged $34,000 a day for a round trip. Some brokers are forecasting daily Panamax charter rate of $50,000 a day by March, according to shipping industry newspaper Lloyd's List.
AND WHAT OF THE FUTURE?
Brokers and analysts say the only way is up. They point to strong demand for coal into China, which is having to source the fossil fuel from longer-haul destinations such as Australia and even Brazil as heavy rain continues to disrupt coal production in Indonesia, a first choice source of import.
Brokers also point to increased expectations that China will continue to import large quantities of soybeans into 2004, while the South American River Plate grain export season which kicks off from March through to May is certain to give the market an added fillip.
"The outlook is incredibly firm. It's giving shippers (charterers) and importers quite a big headache (in terms of costs)," said Collins, who did not know whether the freight boom would alter patterns of global trade in commodities.
"What's clear is that the freight hike is making big companies pay much more attention to how they are managing their freight risk," he said. |
