Another look at shipping

A reader recently pointed me to the Harpex index of container shipping rates, with which I was unfamiliar. The first chart here shows the entire history of the index, while the second chart shows the last year. Some observations: 1) the index does not reflect actual charter rates; rather, it reflects charter rates relative to the full cost of operating a vessel, which in turn includes a return on capital—a value of 1.000 indicates that rates are equal to the full cost of operating a ship; 2) the index is extremely volatile, and has been close to today's levels in the past; 3) the index in my view is not a leading indicator of economic activity, but rather a lagging indicator (it didn't turn up until quite a few months after the end of the 2001 recession); and 4) the behavior of the index in the past month or two is suggestive of a bottom.

While this index presents a view of shipping activity that is indeed grim, as compared to the significant bounces in the Baltic Dry Index and the number of outbound containers from the Ports of Los Angeles and Long Beach, it is not necessarily inconsistent with the view that we have seen the worst of the global recession. No single indicator can tell the whole story, in any event, and I would simply note that there are many "green shoots" that suggest that global economic activity is rebounding: e.g., commodity prices of all sorts, and oil prices.

But since I don't pretend to know much about this particular index, I invite comments.