China Containerized Freight Index Plunges to Multiyear Low, Shanghai-EU Rates Totally Collapse, US..

By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Wolf Street.

Two weeks ago, when I wrote about the Shanghai Containerized Freight Index (SCFI), the index had fallen so far so fast that it seemed to be a statistical fluke, something that would instantly bounce back. The SCFI tracks the spot rates from Shanghai to various destinations around the world. At the time, the SCFI component for Northern Europe had plunged 14% from the prior week to $399 per twenty-foot container equivalent unit (TEU), down 67% from a year ago. An all-time low.

There was a lot of handwringing because, even with the lower bunker fuel costs, the break-even rates for these routes were $800 per TEU, according to a report by Drewry Maritime Research. Over twice the spot shipping rates!

The question was how much lower could rates drop?

A lot lower. Over the two weeks since, the SCFI for Northern Europe plunged another 14% to $343, setting a new all-time low. A terrific 68% collapse from the same week a year ago. Something big is going on in the China-Europe trade.

.....(snip).....

Cheaply borrowed money gets plowed into creating overcapacity: Investors desperately chase yield, and companies become over-optimistic believers in the fallacy that central-bank asset-price inflation can create actual demand for everyday goods needed or wanted by real people. This happened in the global resource sector, in the US oil-and-gas sector, in the global shipping business…. These are among the places where money now goes to die. ............(more)

http://www.nakedcapitalism.com/2015/05/wolf-richter-china-containerized-freight-index-plunges-multi-year-low-shanghai-eu-rates-totally-collapse-us-rates-morose.html