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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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Chinese Shipping Indices go Ballistic as Wave of Exports Leave China

There are a lot of ships sailing around China these days.

As I've discussed several times over the past weeks, Chinese shipping indices have gone ballistic.

The China Containerized Freight Index measures shipping costs for exporting goods from ten major Chinese ports to 11 regions worldwide. And those costs have been rising lately. Up 17% since January 15.

The trend shows no signs of reversing. Last week the index jumped 3.9%. Led by a 7.1% leap in shipping traffic from China to the U.S. West Coast, and an 8.6% jump in shipments to Korea.

The jump in the index means more goods are being sailed from China. Raising demand for shipping, and increasing charter prices.

This is a Chinese-only phenomenon. Shipping rates throughout the rest of the world (as measured by the Baltic Dry Index) fell sharply at the end of January and were flat throughout February.

These data points strongly suggest a wave of exports coming out of China. The indexes don't tell us what goods are being shipped. But there's anecdotal evidence that metals from China are making their way to other countries. Unusual shipments of aluminum, probably from Shanghai, showed up in Japan recently. And January saw a marked increase in Chinese applications for steel imports into the European Union.

Observers in the metals industry have long-feared this "bust that would launch a thousand ships".

China built huge stockpiles of copper, zinc, coal and iron ore over the last year. The fear is much of this inventory is held on speculation of rising prices. If prices fail to rise, all of this metal could re-appear on the world market as worried investors sell. Representing a big drag on global metals prices.

Recent action in the shipping indexes may be confirming those fears. If you're a commodities investor, this is one you need to watch.


By. Dave Forest of Notela Resources


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Leave a comment
  • Anonymous on March 01 2010 said:
    Will this affect Silver and gold prices?
  • Anonymous on March 02 2010 said:
    Concise, informative article!
  • Anonymous on March 02 2010 said:
    Same as Mike's question; what impact will this have on Gold & Silver? Negative or positive?
  • Anonymous on March 02 2010 said:
    Impact on precious metals directly should not be too big. There are a couple things that feed into it though. First is some investors seeing a price drop in base metals could see it as deflationary and flee to cash, selling off silver and gold. Second is other investors seeing this could be more convinced of the end of the world as we know it and load up on the safety of gold and silver. Expect bigger some fluctuations both ways for a while as the various sides enter and leave the market. More profound in it's effect on precious metals is the underlying economic trends such as the ongoing depression, changes in market demands for certain goods, monetary inflation of fiat currencies, etc. Precious metals will almost certainly go up in prices measured against paper currencies because of these.

    The big thing to watch out for is if the public demands big government to step in and save them through all the up coming chaos, there is a potential that they could force everything to a cashless/electronic system to better control things, and make barter, including trades/purchases using precious metals, illegal, causing the demand for such to go way down. That would have the effect of killing a rather large chunk of the precious metals trade as a lot of investors would no longer to "waste money" on something "no longer of value".

    Most of the infrastructure is in place, just waiting for the proper crises needed to gain public acceptance of the system. In other words, they are trying to do an end run around investor's fears about confiscation by the government, by making it far less atractive to a larger part of the public.
  • Anonymous on March 02 2010 said:
    I think this would be Negative impact on copper zinc gold silver IS IT?
  • Anonymous on March 02 2010 said:
    If gold and silver are about to become worthless due to electronic funds transfers, why are so many emerging nations stockpiling? There are far too many consumers out there who don't or will never use credit cards. Don't worry about the potential for a paperless global economy. It won't happen.
  • Anonymous on March 02 2010 said:
    Those who think it won't happen ignore the fact that it's already majorly transferred over already anyways. Credit card purchases, debit cards, bank wires, Paypal, eGold, etc, all paperless. I'm not saying gold and silver will be worthless. The government is not going to make it illegal to own either, just illegal for private parties to use for many purposes. They want more control over you so they can tax you more. This gives them a tool to do so.
  • Anonymous on March 03 2010 said:
    gold has limited industrial application; its value beyond that is its universal acceptance as a store of wealth, but that is as fleeting as the trust and acceptance, it has no other intrinsic value (just a shiny useless relic). Paperless/electronic transactions are already the preferred means of financial settlements. Those who foresee the end of the world to undig their gold might find nobody willing to trade useful things for it. How'd you transact over distances with gold, by courier?
  • Anonymous on March 03 2010 said:
    On what base the paperless e-system will be founded? Will be in the mercinessless of the bankers with manipulation of the markets and big big bubbles of fiat money? You are not going to play the electronic game for a long. Gold standard is the fair real money for 6,000 years, all the others are schemes and dreams
  • Anonymous on March 04 2010 said:
    Oh no, the electronic system will not last more than a few years, and then be gone. Gold and silver will once again become the money of choice. But you and I know the extreme capability of government leaders to choose to try the stupidest route first. The electronic system will happen, and sooner than one might think. But no, it won't last more than about 3-8 years before coming unglued like all fiat currencies before it have.
  • Anonymous on March 05 2010 said:
    Trade cannot continue in worthlessness.
    E-Trade, E-Banking, Fiat base, and others would seem possible. However, the longevity seems a lot shorter than supposed. I look to 1-2 years at most, too many pressures, and not enough substance for investors, etc.
    Business as usual doesn't allow the theft level enjoyed by the present systems, causing my skepticism.
    Might only last a matter of days or until the people find out about its true worth...
  • Anonymous on March 07 2010 said:
    For 5000 years govts have been claiming they have a magic wand that will make gold and silver worthless. "Better stock up on paper/fiat/e-money now." Guess what? An ounce of gold still buys what it did back then. Just ask the Chinese. They're on their 5th fiat currency now.
    And now we're gonna have e-money. Digits on a computer screen. You won't even be able to burn it to stay warm. A silver quarter still buys a gal of gas or kerosene just like it always has, and always will.

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