China’s ghost ships ply the bulk routes

From Reuters today comes an interesting story that complements this morning’s coal musings:

China’s huge fleet of coastal ships, usually confined to plying the Chinese seaboard, has sailed out of the shadows to seek international business in yet another sign that China’s economy is slowing.

The fleet, previously unnoticed by the global market, is suffering from a slowdown in China’s coastal trade amid weaker domestic demand from utilities and steel mills and a growing glut in Chinese coal and iron ore stockpiles.

The vessels are now being forced to seek new business such as in the Indonesian coal trade, dealing a further blow to the depressed global dry bulk shipping market.

“There are many more ships lying idle at Chinese ports now – the environment for making money is not so good,” said a source at one of the big five coastal shippers, who asked not to be identified.

…China’s coastal trade existed for decades on a small scale, but began to boom when power generation needs in the country’s south took off due to mass industrialization and coal was urgently needed from the northern mines.

China’s coastal coal trade soared by 88 percent from 2006 to move 639 million metric tons (704 million tons) in 2011, according to securities group Jefferies. Shipbroker Clarksons estimates China’s coastal trade of coal, steel, grains and fertilizers at over 1 billion metric tons.

But in the first four months of 2012, coastal coal trade shrank by 3 percent versus last year, says Jefferies.

“The iron ore and coal inventories at Chinese ports are very high,” said Moses Ma, a Hong Kong-based shipping analyst at ICBC International, a subsidiary of the Industrial and Commercial Bank of China. He says he has a bearish view on the dry bulk and the coastal trade markets this year.

Regular readers may recall that I posted recently on the weakness being signalled in the Chinese shipping indexes. Nothing much has changed. Here is the China coastal bulk index still weakening:

And for coal:

Some nice discounts coming for the miners.

David Llewellyn-Smith

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

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Comments

    • Agree. This is a pretty good indicator that China has unexpectedly slowed. One of the msot simple and objective indicators I’ve seen.

  1. Only the mainstream media and the people who read it would say that China’s slowdown is ‘unexpected’. Those of us who dig a little deeper than Pascoe/Kohler/et al have known for years that the Chinese attempt at ‘capitalism’ has been and was always going to be, a dismal failure. You can only go on employing people to dig metaphorical holes and then fill them up for so long before the metaphorical wheels fall off.

      • Problem with a story like this is it applies to the international shipping trade, not limited to China at all.

        Spend a little time reading through any of the international shipping sites to get a wider feel for what is going on.

        Hellenic Shipping is not bad – here’s a link but I’ve opened it on page that covers containerised freight from Shanghai :

        “The week ended with a rise in the Shanghai Container Freight with a remarkable rise in the main trade from Shanghai to base ports of Europe and in the secondary trading route from Shanghai to Australia (Melbourne). The Shanghai Container Freight Index ended on Friday 29th June at 1460, up by 2% from previous week’s closing at 1425, while is up by 54% from the end of December 2011, when it was at 948.”

        Could this be the start of the pickup the China Beige Book is showing?

        http://www.hellenicshippingnews.com/News.aspx?ElementId=0d3fefd8-7dbd-44de-817f-9c22b245f223

        Explore the site – lots of cool stuff.

        • If you read my original post you be aware that I published the Shanghai containerised index as well.

          Unless you have something to add beyond your cash for comment please refrain.

          Have a good weekend.

          • Sorry HnH. Just read this post again, still missed it. Anyways, back to my point – could be the start of an upswing. We can hope.