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Global Shipping Freight Rates Slump as Trade Slows

11/5/2018 4:00:28 PM

The cost of hiring container ships has plunged 24 percent from a multi-year peak while raw material vessel rates have slumped 10 percent from a five-year high, adding to signs of slowing global trade with dangerous implications for the economy.

While much of world is focussed on the stock market losses last week, the drop in shipping rates as trade declines because of the trade dispute between the United States and China, emerging market currency weakness and tighter credit conditions is an omen of slowing global economic growth.

At the start of supply chains, dry-bulk carriers move raw materials like coal and iron ore from mines to smelters while container ships complete the cycle by carrying the vast majority of global manufactured goods from factories to consumers.

Dry-bulk and container rates climbed to multi-year highs earlier this year, but have plunged since then as the trade war between the United States and China, in which both sides have slapped steep import tariffs hundreds of goods, has picked up pace.

"The flattening out of the Baltic dry index, corroborated by the container index as well, points to a slowing down of the global economy for sure," said Ashok Sharma, managing director of shipbroker BRS Baxi in Singapore.


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