By John Galt
August 28, 2011 – 20:20 ET
While America and the northeastern states are fascinated with a tropical storm that while tragic, was minimal in economic impact overall, one of the largest shipping companies in the world reported their H1 2011 earnings and it should give everyone a moment to reflect on the probability of a Q3 recession beginning in September of this year as I have postulated for months now. The report from the communist Chinese majority owned shipping corporation COSCO was dismal as reflected from the headline and story in Xinhua yesterday:
The story highlighted the depressed world economic condition moving into the latter half of H1:
“We hope to see the market warm up as the world economy bounces back” in the second half of the year, Wei added.
The shipping industry, which acts as a barometer of world economic activity, has been affected by the fragile economic recovery.
The dismal market, plagued by the rising price of oil, overcapacity and fierce competition, has further strained the company’s operations, said Zhang Liang, executive director.
During the first half, revenue from COSCO’s container business declined 5 percent year-on-year.
The company’s dry-bulk shipping business was most seriously affected by industry overcapacity, resulting in difficulties in raising charges. Revenue from the bulk shipping business fell 27 percent to 12.2 billion yuan during the period from a year earlier, according to the company.
Thus either the Chairman of COSCO is telling another government mandated lie to cover for an ever poorer performance or the world economy is actually slowing down and thus the need for raw materials for China’s giant industrial machine has slowed dramatically. The telling statement from the story is is from the company’s executive director, Zhang Liang:
“The current operating environment for bulk cargo-ship owners is worse than during the (2008) financial crisis,” Zhang said.
For some perspective, here is the BDI (Baltic Dry Index) as of the end of last week:
While the 3 year weekly chart reflects a traditional bounce heading into the autumn, these levels are far below those of 2009 and 2010 and if the “recovery” as projected by the U.S. Fed Chairman and hopes of economists around the world does not accelerate, then the chart should roll over hard by October and validate the arrival of the double dip recession feared by world governments and political elites.