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Shipping Rates Decline to Zero... Yes, Zero

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Last week we covered the importance of the Baltic Dry Index, which everyone now knows has been in the process of collapsing since 1007. But what does it mean if shipping rates to decline to zero? Simply put, this: the 1992-built, 151,492 deadweight tonnage Frontier, owned by Hanjin Shipping, was chartered to ship 150,000 tonnes of coal at a rate of US$6.80 per tonne, which one broker said “calculated as a negative return on this vessel.”

Basically, that means the rate doesn't cover the cost of port expenses and bunkers. From the article:

"Last week, voyage rates to transport iron ore from Western Australia to China remained around the “low six or six-even” dollars per tonne, according to one broker. This equated to loss-making time charter equivalent of between US$7000 and US$8000 dollars per day, he said.

“At this rate we’re talking about way, way below break even,” he said."
POSITION:  No positions in stocks mentioned.