Finance Matters

Archive for March 12th, 2010

The China Containerized Freight Index has bee-lined upward in 2010. The index tracks shipping prices for goods sailing from China to 11 different regions around the world.

Between January 15 and February 26, the index rose 17%. During the same period, the Baltic Dry Index (which tracks average shipping prices globally) fell 18%.

As I mentioned, these numbers suggest a big increase in goods being shipping from China relative to the rest of the world. With anecdotal evidence that at least some of the exports were metals.

The fear being that Chinese metals stockpiles are being drawn down and re-exported. Potentially weighing on global prices.

But the upward pressure on shipping prices relented a little this past week. The China Containerized index fell 3%. The first decline since December 18. And the largest since early in 2009.

Here’s the interesting thing. Most of last week’s decline was due to falling rates on just two of the CCFI sub-indexes. Eastern and Western U.S.

Rates for shipments from China to Eastern U.S. fell 13%. Rates for the Western U.S. plunged 12.3%.

As the charts below show, the U.S. routes have been a major contributor to rising Chinese shipping rates. That trend may now be reversing.

What’s the explanation for the rise and fall? Many businesses in the west have recently been re-stocking inventories drawn down through 2009. Last year, with the financial crisis looming, businesses were uncertain whether to build up new inventory. Managers didn’t know if there would be a market for the products.

But with the world economy seemingly in recovery in 2010, businesses have been restocking. Undoubtedly contributing to the rise in shipping.

This has created a quick-glut of demand for many products, including metals. Almost certainly providing a boost to prices.

But this lift is temporary. By many reports, re-stocking is almost complete at most businesses. Perhaps explaining why shipping rates started to fall last week.

The key will be to see what market prices settle at without the upward influence of inventory building. And whether companies can actually sell the inventories they have built this time around.

Some price drivers are forever. And some come and go. It’s important to recognize the difference.

Dave Forest
dforest@piercepoints.com
www.piercepoints.com
Copyright 2009 Resource Publishers Inc.

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See Also:

• How The Fed Took The Oil Market Hostage And Has Never Let Go
• How China And Oil Exporters Will Gouge The World With Current Account Surpluses Over The Next Five Years
• Here’s Why Peak Demand For Oil Is Still Very Far Away

The never ending legal battles of the Recording Industry Association of American landed at the U.S. Court of Appeals in D.C. today as attorneys, including Jenner & Block partner Paul Smith, argued over ringtone rates.

Legal Times: Here’s how [Smith] put it in a D.C. Circuit brief last month: “Record companies use their best efforts to pay royalties to music publishers and other copyright owners in a timely manner. However, the unique character of the mechanical licensing market makes that challenging. The most important factor causing late payment of mechanical royalties is the failure of publishers and songwriters to advise record companies promptly of the split ownership of songs.”

Often, there are several parties who should receive royalties from a single song as songwriters, composers, performers and other parties may have a cut of the ownership.

The Copyright Royalty Board has a 1.5% late fee every month for licenses to use pieces of music that have already been publicly released.

Kelsi Brown, the attorney for the Justice Department’s Civil Division called Smith’s arguments “complete fiction.”

And the battle rages on.

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See Also:

• Judge Orders 25-Year-Old To Pay RIAA $675,000 For Downloading 30 Songs
• Copyright Boogeyman Returns: RIAA wins suit against Usenet Newsgroups
• Internet Providers Missing In RIAA’s Fight Against Piracy

In all the talk about healthcare and everything else, this story got shockingly little attention.

VP Joe Biden went to Israel, and actually made pointed comments about Israel settlements, and his belief that they’ve been an impediment to Peace in the Middle East.

It’s obvious what’s going on. Obama is using the Vice President to say things he can’t comfortably say politically.

Don’t expect any big changes yet, but as Israel issues have huge ramifications across the Middle East, and thus big business implications (oil, trade, etc.) it’s important to watching this seed of a story.

See The White House’s official pictures of the trip here >

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LOS ANGELES (AP) — Disney is shutting down a facility in the San Francisco Bay area that was used to capture Jim Carrey’s acting in “A Christmas Carol.” It’s a move to further cut costs at Disney’s movie studio.

The Walt Disney Co. said Friday the closure of the facility will be completed by January and result in the loss of 450 jobs.

The facility was built by ImageMovers Digital, a company co-founded by “A Christmas Carol” director Robert Zemeckis and partially owned by Disney.

Before it closes, the complex will continue to be used by Zemeckis and his team to complete production of “Mars Needs Moms!,” a 3-D movie set for release in March 2011.

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See Also:

• Disney CEO Bob Iger: There Are ‘No Guarantees’ About Keeping ABC
• Alice In Wonderland’s $116 Million Opening Weekend Boosts Disney
• Disney Switches On WABC In Time For Oscars, But For How Long?

From Variety:

The Murdoch paradox was in full evidence last week. Though he has always distrusted movies, he is gratified by the “Avatar” revenue stream, the endless bliss emanating from “American Idol” and the overall prosperity and stability of his Hollywood properties. But he is, at heart, a print man, and his critics continue to fault him for his lavish spending on newspapers. The New York Post loses an estimated $70 million a year. A year ago News Corp. took a $3 billion writedown on its newspapers, reflecting the impact of the much-criticized $5 billion acquisition of the Wall Street Journal.

In initiating his assault on the Times, his nemesis of the moment, Murdoch is amping up his newspaper wars at a time when his bankers would like to see him make a peaceful exodus.

Read more at Variety>

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See Also:

• Rupert Murdoch To Arab World: Creativity Is ‘Infinitely More Precious’ Resource Than Oil
• Why Rupert Murdoch Will Lose His Battle To Kill The New York Times
• Steve Jobs And Rupert Murdoch: Let’s Sue The Internet