Thursday, November 3, 2022

Shipping Indexes: The Real Economy

The real economy moves lots of stuff around, most of it in ships.  Raw materials like coal, iron ore, fertilizer and grains are transported in bulk carriers and finished products in containerships.  The vessels are chartered either long-term (time charters) or on a voyage basis (spot).  Spot charter rates are, therefore, among the best current economic indicators since they reflect the actual supply/demand balance for raw materials and finished goods.

Moreover, unlike financial markets shipping rates are almost impossible to manipulate;  there are simply too many players and too many destinations, with none dominating. Thus, it's a pretty "pure" market.  Even though futures contracts for freight rates do exist, they are not very popular or active.  Therefore, shipping is one sector of the real economy that hasn't yet become "market-ised" and "financial-ised" (unlike, say, energy or pollution emission permits). 

Recently the pandemic created massive disruptions in the global supply/logistics chain and caused spot charter rates to rocket upwards (see charts below).

Baltic Dry Bulk Carrier Spot Charter Rates

Freightos Container Shipping Index

After nosebleed levels, charter rates are now rapidly coming back to the ground, albeit  still somewhat elevated vs historical averages. This price action has apparently caused the head of AP Moeller Maersk, the world's largest containership and logistics company, to comment that he expects Europe to go into recession very soon, perhaps followed by the US as well. 

Yet another global recession warning from the head of one of the largest real economy companies in the world.  Couple it with high inflation, which the Fed and ECB are clearly NOT willing to deal with decisively with strong QT, and we are left with the prospect of an anemic economy saddled with high inflation.  Not good news for financial markets, aka The Uninvestible Universe.


  1. Leaving this here as a kind of reminder to myself... I would like to write about it later.... much later... when I have a bit more time...

    1. Thanks for the article, it is very insightful. In my mind the class warfare cited in the article boils down to the ever-widening economic chasm between the haves and the have nots, which seeps through to cultural differences, widening the rift even further.

      Essentially, it's this: the have nots resent the haves and express it in more ways than just finances, jobs, etc. Resentment manifests itself as guns, abortion bans, education wars, etc etc. Like Bill Clinton said years ago: "It's the economy, stupid!"

    2. yes, certainly, I definitely see an economic aspect to it... but from an overseas perspective, it is a bit hard to accept as the full explanation...

      is the problem really that the U.S. people are not rich enough?.... if so, who can be rich enough...

      is the problem really that of distribution?... Mexico's gini index is higher... sure people are unhappy,... but I don't think there is such mutual hatred...

    3. You can blame Putin for stoking so much hatred in the US. Yes,, really. Hybrid warfare is a permanent part of the Russian m.o. They're at war permanently, not all war is kinetic to the Russians. Just ask who stands to gain the most from all the internal division in the US? Yes, Russia. It's no coincidence that the current Republican Party literally repeats Kremlin talking points verbatim. Or that Putin now switched to claiming Ukraine is run by Satanists... they're clearly appealing to the evangelical GOP low information voter; they switched to the Satanist talk since the Nazi talk was making American fascists uncomfortable. And yes, there's division and hatred in Mexico too, especially since the current left-leaning President is in office, but it's the usual 'Socialism bad' talk and not the kind of "democracy at risk" hatred you see in the US. The reason is that the US is in Putin's crosshairs and not Mexico of course.

    4. This explains the culture wars aspect of it too, something Putin has been very good at exploiting in order to drive a wedge through American society. Do watch the whole video, in my opinion he nails it...

    5. hey camabron, nice to hear from you... the reply will have to be a bit later... seriously buried now... take care yeah. =)


    7. Good video akoc, regards!

    8. Methinks social media for its need to cause strong feelings for more eyeballs (and hence profit) has a large role in increasing conflicts within societies and between societies. It is America's gift to the world. Unfortunately, America is also the epicenter of social media.