Shipping index signals China slowdown

Baltic Mar11.pngThe blog’s recent visit to Singapore included several discussions about the slow start to the New Year in China. And these concerns were confirmed last week in the downturn reported by the OECD’s leading indicators for China (Organisation for Economic Co-Operation and Development).

Separately, as the chart shows, the Baltic Dry Index of ocean freight costs is signalling a similar trend. It is an excellent proxy for world trade and activity in China, as it covers the heavy bulk products (iron ore, grains, coal).

It was strong through 2007/8, before collapsing. And it then rallied again until last June. But since then it has fallen quite sharply, and is now very close to its earlier lows in Q4 2009.

Of course, part of its weakness relates to the terrible floods in Australia earlier this year. These clearly reduced coal and other volumes. But it has since shown little evidence of recovering, which is not a good sign. The blog will continue to monitor developments closely.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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