Harpex Shipping Index: Grim, But Not Hopeless

A reader recently pointed me to the Harpex index of container shipping rates, with which I was unfamiliar. The first chart here shows the entire history of the index, while the second chart shows the last year. Some observations: 1) the index does not reflect actual charter rates; rather, it reflects charter rates relative to the full cost of operating a vessel, which in turn includes a return on capital—a value of 1.000 indicates that rates are equal to the full cost of operating a ship; 2) the index is extremely volatile, and has been close to today's levels in the past; 3) the index in my view is not a leading indicator of economic activity, but rather a lagging indicator (it didn't turn up until quite a few months after the end of the 2001 recession); and 4) the behavior of the index in the past month or two is suggestive of a bottom.

While this index presents a view of shipping activity that is indeed grim, as compared to the significant bounces in the Baltic Dry Index and the number of outbound containers from the Ports of Los Angeles and Long Beach, it is not necessarily inconsistent with the view that we have seen the worst of the global recession. No single indicator can tell the whole story, in any event, and I would simply note that there are many "green shoots" that suggest that global economic activity is rebounding: e.g., commodity prices of all sorts, and oil prices.

But since I don't pretend to know much about this particular index, I invite comments.

Comments

[Capt. Mike ...:]

We are in the business, and we have seen a uptick at Long Beach the last two months, which has alway indicated, although ever so small, a definite movement up and hopefully out of this mess. It indicates that the basic industries are starting to increase inventories with a future rebound in the works. Long Beach ( we are in Houston) has always led the up or downward movement of cans before the rest of the ports notice.

Jun 22 04:33 PM

[will:]

Whoever runs Dryships, should be fired at once. What a disgrace of a stock.

Jun 23 11:10 AM

[Ellito:]

Shipping will do fine before X'mas months.
Lots of goods being shipped all around the world.
Wait & See.

Jun 23 10:55 PM

[Ellito:]

Forget about DRYS or EXM.
SBLK & OCNF both are making positive earnings now.
Why not grab these 2 while they are so cheap now.
Check them out yourself.

Jun 23 10:59 PM

[mattfinance:]

Please note today’s press release announcing the launching of a series of stock market Maritime Indices by Capital Link.
I think these indices address a market need and will gain following in the investment and shipping community.

You can pick them up from these websites at MaritimeIndices.com or CapitalLinkShipping.com or from Bloomberg at page “CPLI”. They will soon be available on the Reuters terminals as well.

Jun 29 09:18 AM

[OsideRes:]

The Baltic Dry Index is trending up. Check this out at this URL:

www.dryships.com/pages...

Jun 29 04:48 PM

[Ellito:]

Grab some ships.
It's now or never !

Jun 30 07:59 AM

[Peter Iwano...:]

There are select good names in the shipping industry, but with the recent huge run up in the BDI most of them seem relatively fair valued.

One caveat is that I would stay away from DRYS. That stock has so many numerous issues, one cannot begin to list them.

Jun 30 11:33 AM

[Ellito:]

Each time when you see those analysts used words like " GRIM" and "HOPELESS." or "RISKY."
You know they have an agenda.
Watch out, sometimes Cramer is more honest than some of these guys.

Jul 07 05:04 PM