In spirit of the 2008 Olympics that kicked off today in Beijing, I came across this interesting article from The Economic Times explaining how this years Olympics brings down ship freight rates. Now I’m no economist so I think you will be better off reading the article for yourself HERE. But the gist of it is that China will effectively shut down for the next 17 days and the events leading up to, during and after the games are going to have a lasting effect on ship freight rates.
All factories, workshops, and industrial estates in and around Beijing province will be closed to ensure tourists and deadly serious sportspeople don’t get a whiff of smoke, see ugly machinery or the usual detritus of a country that has become the world’s factory yard.
Since Chinese factories will be shut, they would not need copious volumes of raw material, nor have giant ship-loads of finished goods to move out. Moreover, China had been stockpiling diesel and crude oil before the Games to ensure uninterrupted supplies. That record demand for tankers to carry crude is expected to drop 40% once the Games start. So basically, China needs very few ships right now. That has acted as a sledge hammer on ship freight rates.
Essentially, supply currently outweighs demand and that’s a good thing… right?