When Shipping Overcapacity Meets Falling Demand

By Mish Shedlock of Global Economic Analysis

Investment Advisor Representative - Sitka Pacific Capital Management • Dec 8, 2015 at 4:55 PM EST

These charts clearly show something happened in the first quarter of 2015 when shipping demand met with an increasing number of ships.

The following charts show what happens when an increasing number of ships meets falling demand.

Harper Petersen Shipping Rates by Vessel Size - Ten Years

image: http://4.bp.blogspot.com/-NeQn5KKa5pw/VmdF03IIrFI/AAAAAAAAgfY/gdbzBSVawug/s400/Harper%2BPetersen%2B2015-12-08A.png

Source:

More charts below, but first let's explain TEU.

TEU stands for twenty-foot-equivalent unit. It's an imprecise term because lengths have a 20-foot long (6.1 meters) standard but heights vary.Heights range from 2 feet three inches to 9 foot six inches. The most common heights are 8 feet 6 inches (2.6 m) and 9 feet 6 inches (2.9 m).

image: http://2.bp.blogspot.com/-W6nEWjr-3Ns/VmdPRGVIUxI/AAAAAAAAggQ/hrxPJZTVbRQ/s400/TEU.png

Let's hone in on shipping rates for the last two years.

Harper Petersen Shipping Rates by Vessel Size - Two Years

image: http://1.bp.blogspot.com/-JzEuyJI--p8/VmdJ9IOFd1I/AAAAAAAAgfw/n1-M39GfUCM/s400/Harper%2BPetersen%2B2015-12-08B.png

Harper Petersen Index - Ten Years

image: http://3.bp.blogspot.com/-MRkVjEFEkqw/VmdLKOyHlNI/AAAAAAAAgf8/FLsd9A8Qqao/s400/Harper%2BPetersen%2B2015-12-08C.png

Harper Petersen Index - One Year

image: http://2.bp.blogspot.com/-PdIT1Kw9EQ0/VmdLfxA3_aI/AAAAAAAAggE/z-1awL-VgkU/s400/Harper%2BPetersen%2B2015-12-08D.png

Something clearly happened in first quarter of this year in terms of shipping demand.

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