Published February 06, 2012
If you’ve got a few tons of stuff to ship several thousand miles, today is your lucky day.
That’s because shipping rates have just gone negative.
According to Bloomberg News, shipping operator Global Maritime Investments rented out a vessel to commodities trading house Glencore International at a ridiculous rate of negative $2,000 a day.
That means GMI, one of the world’s largest privately owned freight trading groups, essentially paid London-based Glencore to ship its grain to Europe from Australia. GMI likely picked up the tab for fuel costs, which are typically paid for by the chartering group.
“They’re doing this because you can’t just have ships sitting. If they sit too long, then that’s hard on the ships. They have to keep them loaded and moving from port to port,” said Darin Newsom, senior commodities analyst at DTN.
Glencore didn’t respond to a request for comment and Cyprus-based GMI wasn’t available for comment.
While some may see it as a sign that the Mayans got it right with their 2012 prediction, there is a precedent for this.
“It’s unusual, but it does happen,” said Douglas Mavrinac, an analyst who covers the shipping industry at Jefferies.
While some blame the recent plunge in shipping rates on an oversupply of ships, Mavrinac pointed to poor demand. He said it’s unclear whether the decline in demand is tied to seasonal issues like the Chinese New Year or a slowdown in the broader economy.
Despite signs the global economy continues to grow, the closely-watched Baltic Dry Index is in free fall. The index, which is seen by some as a leading economic indicator, is in the midst of a 32-day slump that has wiped out 66% of its value.
“It probably is more seasonal than not, but you just don’t know,” said Mavrinac.