Check-Up on China and the Baltic Dry

China's Shanghai Composite stumbled significantly during the late summer, but it has come back nicely with a gain of 24.5% off of its lows at the end of September. While its rally has been impressive, Shanghai has yet to take out its 2009 highs made in early August. At the same time, the cost to ship goods as measured by the Baltic Dry Index has increased 115% since its lows in September and has made a new 2009 high. Traders like to relate the Baltic Dry Index to how things are going in China, so with the Baltic Dry charging to new highs, will the Shanghai Composite follow?

click to enlarge

Comments

[James Lewis]

The question is, is the Baltic at new highs because shipping companies have cut capacity and routes. The shipping industry has colluded and it working together to manipulate freight transit rates. So to me the baltic index is just a manifestation of the reduced capacity when the west is restocking for christmas.

China's exports have been ok the last 2-3 months.
Not great, not as bad as last year.
The Shanghai market is awash with liquidity.
The Shanghai property market is awash with liquidity.

Hot money flows are quite high.
Savings are coming out the bank.

Expect things to slow down as we enter winter,

2009 Nov 19 12:00 PM

[Alan Young]

Completely wrong. Shipping companies are drowning in overcapacity. There are dozens of independent shippers based in many different countries. What collusion??

On Nov 19 12:00 PM James Lewis wrote:

> The question is, is the Baltic at new highs because shipping companies
> have cut capacity and routes. The shipping industry has colluded
> and it working together to manipulate freight transit rates. So to
> me the baltic index is just a manifestation of the reduced capacity
> when the west is restocking for christmas.

2009 Nov 20 10:19 AM