Virus Shock Crashes Baltic Dry, Sparks China Hard-Landing Fears

The Baltic Exchange’s main sea freight index plunged on Friday, with rates for capsize vessels hitting a record low as an economic shock could be developing in China as two-thirds of its economy has been shut down because of the coronavirus outbreak.

The Baltic Dry Index, which tracks rates for capesize, panamax and supramax vessels, ferry dry bulk commodities across the world slipped 11 points, or about 2.2%, to 487, the lowest level since April 2016, reported Reuters.

The Baltic index has plunged 10.5% this week as coronavirus cases in China soared, and factories and cities in some of the largest industrial hubs in the world ground to a halt. This in itself is producing an economic shock, first seen in industrial metals and energy prices plummeting in the last several weeks.

The capesize index has fallen by more than 99% this week, the sharpest drop on record as demand for large-sized bulk carriers and tankers typically above 150,000 deadweight tonnage, comes to an abrupt stop.

The panamax index declined 3.5% on Friday, down 14% on the week.

The supramax index lost 4 points to 524 on Friday.

We’ve noted that the “frontloading” effect ahead of tariff deadlines ended in late 3Q19 when the first signs of a trade resolution emerged between the U.S. and China.

In the last four months, the Baltic index has crashed the most since 2008 and has confirmed our slowbalisation thoughts.

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