January 18, 2009

SOME NOT-SO-ENCOURAGING ECONOMIC NEWS: “Freight rates for containers shipped from Asia to Europe have fallen to zero for the first time since records began, underscoring the dramatic collapse in trade since the world economy buckled in October.”

UPDATE: I emailed a reader in the shipping business over there to ask if this was true. Response:

Very.

This is the most hard hit trade. I’ve heard of rates as low as $75 for Asia-Europe, which is far less than bunker, but better than a non-operating vessel. Maybe we’ll see an uptake in the use of refrigerated containers as a low-cost travel alternative. :) I can see laid-up ships from the window of my apartment. Just one look and you can tell the bulk market has collapsed. Pictures forthcoming.

I believe this is a reflection of the drop in oil price since many shipping companies had a ‘floating bunker’ scheme to protect them from an oil spike. Now that the oil price has tanked the calculation can sometimes result in negative rates. Coupled with the spread of the financial crisis from capital goods to consumer goods being manufactured in China, it has only made the situation in Asia worse. I wouldn’t be suprised if a million of the Chinese traveling home next week for the New Year were told by their employers not to come back.

And what will that do for political stability in China? This just underscores Daniel Drezner’s point: “Here’s the thing: while Iran, Israel/Palestine, peacekeeping, etc. are all important topics, the bilateral economic relationship should be the top issue on the agenda. It should also be second (exchange rate policy), third (fiscal policy), fourth (trade policy) and fifth (regulatory coordination) on the agenda, by the way.”

Comments are closed.
InstaPundit is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.