Freight Rates Move Sharply Higher

Freight rates are sharply higher on rising crude oil, strong demand from China and an idling of overcapacity. The Baltic Dry Index - the benchmark guide to drybulk shipping rates on 40 routes across the world - closed at 3,259 last night up 27% since a recent Feb 15th low of 2,566.

Containerised shipping rates are also sharply high. Hapag-Lloyd and Maersk Line have both announced rate increases recently. A report on Dow Jones Newswires says that "the cost of shipping a standard 40-foot container of merchandise averaged about $2,500 globally in January, up nearly 50% in the past year and 62% from a trough of $1,540 in May."

Japan snubbed South America to purchase US corn over the weekend, citing that shipping costs were too expensive from Brazil or Argentina.

It seems that the super cheap discount rates of twelve months or so ago have finally dried up as ship owners idle vessels rather than operate them at a loss. Once again the world is shrinking.