Economic Highway to Hell

A number of time series around the globe refuse to make those who monitor them happy. Most of them took an impressive dive in the crisis which was unleashed upon us in 2007/2008  and stubbornly refuse to emit any glimmer of hope ever since. I have been looking at the CONTEX index for a while now and it makes a good addition to the list of hopeless indices. The CONTEX is issued by the Hamburg Shipbrokers Association and it is updated every Tuesday and Thursday (talk about real time). It compares well with other similar indices and it is the only index which covers the Containership Chartering market. It is basically a Time-Charter-Rate index which expresses the cost of chartering a unit of shipping for a unit of time. It is mostly based on Hamburg based charter firms (making up a good portion of the market) and on a wide range of ship types so that it should be representative of its market. The index is of course determined by the supply and demand of shipping capacities so that keeping the supply of shipping capacity fixed it is a good business cycle indicator as well. We know that there is a problem of overcapacity and of fierce price wars in the market in the last years and that certainly contributes to the index’s negative development (what this means for investors and shipping funds see here). Here is what the index looks like:

In the crisis the index lost 4/5 of its value and after it bottomed out in early 2010 it recovered half of its losses by early 2011. Since then it has lost most of what it recovered standing around 2/5 of its value compare to before the crisis. The index is once again under 400 points having assumed a negative trend again.

While it is hard to separate the effect of oversupply of shipping capacity (new ships coming into the market) it would be hard to deny that a large part if not most of the losses are due to the ongoing economic crisis.

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