Shipping Costs 'Stupid'

Wednesday 27 Oct 2021

(IndustryEdge, Australia 10 Oct, 2021): Shipping costs hit ‘stupid o’clock’ - Bulk and commodity trade and vessel movements are embroiled in further turmoil in early October, with day rates for vessel leases spiking so dramatically, a commodity trader told us, “Its stupid o’clock out there. You can get a vessel, but you’ll pay through the nose, and rates are increasing by the hour some days.”

The trader provided the comments to IndustryEdge during a client call, as discussions centred around changes in the make-up of Australia’s log exports and the obvious challenges in accessing shipping containers.

Defying expectations, the trader switched from their interest in containerized log exports (detailed later in this item) to raise bulk shipping as the new concern they were weathering.

To put these comments into their proper context, by the 8th October, the main bulk commodity shipping index had lifted 53% compared to the prior month. The Baltic Dry Index (BDI) – as the chart later in this briefing shows – skyrocketing almost 1,700 points to 5,526 points.

While true that the BDI is a perpetually volatile index, the stellar rises are adding to the turmoil in global shipping and freight markets right now.

Whether it is raw materials to feed industrial production, availability of containers, throughput capacity and logistics at ports, or shortages of truck drivers, the current situation is disastrously complex. For those at the furthest ends of the global shipping and freight system – Australia and New Zealand among them – the impact on national economic activity is becoming all the more serious as time passes.

The global turmoil appears to be an ever-compounding series of inter-related events, where the magnitude of the challenges increases with every response to the previous conditions more divergent than the last. In some respects, this is a classic feedback loop, but in other regards, the evidence is more akin to chaos theory.


Graph: Baltic Dry Index Credit:

Source: IndustryEdge

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