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Global Trade and Port Data Seasonality

One of the many indicators that we track is that of the Los Angeles and Long Beach port data.  Combined these two ports handle almost 50% of the shipping traffic for the United States so they are obvioulsy useful in order to follow global trade.  As you can see in the chart port data s very seasonal.  You can see that total trade (the green line) typically peaks in October and typically bottoms in February.  Sometimes this cycle is off by a month in either direction but for the most part it’s very consistent. (Click on chart to enlarge)

LA and Long Beach Port Data

port-data

While total shipping volume, outbound plus inbound containers, is down over 25% from the peak back in September of 2007 it is important to look at the same month due to seasonality.  Looking at shipping volume from Feb 2010 against the peak Feb in 2007 shipping is down -13.7% or 118,562 containers.

So is trade improving or getting worse?  By breaking the data down into performance by month we can see if this January and February are better or worse than other years.  In the chart below you can see that for 2010 Jan and Feb were both actually slightly above their historical averages.  The average January sees traffic shrink by -3.10% and this year it only shrank by -3.05%.  February sees an average decline of -4.42% and for 2010 it only declined -2.89%. (Click on chart to enlarge)

Port Data Seasonality For Jan And Feb

jan-feb-port-data

Frankly right now the data isn’t screaming at us.  Numbers are coming in close to the historical norms but overall there is little to get too worked up about. Basically port data is currently telling us that the recovery is still in progress but that nothing is really improving or declining.  What would be a constructive sign would be to see March where we have a historical average increase of 10.69%.  A large miss would be a bad sign while an average or even slightly higher number would be considered by us to be very bullish.

Happy Trading,

Dave@TheMacroTrader.com

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Port Data, Green Shoot or a Weed?

If you have been following port data you no doubt saw the large spike in March of both inbound and outbound volume, and then a bit of continuation in April and May.  A lot of people, both mainstream media as well as bloggers, came out saying that this was a huge green shoot and a sign that things were improving for the global economy.  The Macro Trader came out with this post (click here) where we explained that there is a lot of seasonal influence in shipping and without looking at it you are missing a huge part of the picture.

Looking at the data below is the chart for the month of March from 1995-2009 (click to enlarge).  As you can see March is a historically strong month, in fact it is historically the strongest month of the year.  So while we had a strong rebound in month to month data that was to be expected in March.  What many commentators forgot to mention was the year over year numbers which were anything but impressive, being down -17.21% that same month, not exactly the definition of a green shoot.

March Data

march-port-shipping-data

So where are we now?  Well after March we had slight increases in both April and May.  Historically April is the second best month of the year, so again not very unexpected.  In June we had a decline of -6.02%, and a year over year decline of -19.31% in total loaded volume. Looking at the chart below (click to enlarge) you can see that seasonality is easily seen in the data and that we are a ways off from a new move higher.

Combined Port of Long Beach and Los Angeles Data

long-term-port-data-for-la-and-lb

We looked in the dictionary of overused terms and negative numbers were not under the term “Green Shoots”, however when we looked under weeds the exact definition was “negative numbers.”  OK, maybe that was a sad attempt at being funny but still the numbers are not pointing to a current increase in global shipping. To help smooth out the data and show the long term trend of shipping data here is a chart of total loaded along with a 12-month moving average (click to enlarge).  As you can see we are still in a downtrend and it will take more then a few months of increased activity to show real improvement.

Total Loaded with 12-Month SMA

total-loaded-chart-with-12-month-sma

Happy Trading,

Dave@TheMacroTrader.com

http://TheMacroTrader.com

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Title: Port Data, Green Shoot or Weed?
URL: http://www.themacrotrader.com/2009/07/19/port-data-green-shoot-or-a-weed/

Oil, Rig Counts, and Contango

In our subscriber letter this week one of the topics that we discussed was the production destruction as seen in the rig count data provided by BHI-Baker Hughes. They provide weekly oil rig data for the United States and Canada and Monthly numbers for international data.

So what do the numbers show? Well in the United States and Canada the rig count has come down 57% from the highs seen in 9/1/08. This has taken the rig count back to the levels seen in 2002.

US and Canada Rig Count

us-canada-rig-count

Internationally the situation is not quite as bad, but it is still bad. Rig counts worldwide have dropped off 35% and we are back to levels not seen since 2004.

International Rig Count Data

international-rig-count

After looking at these charts it would seem logical to say that oil is going up as production levels are down so much. Long term this is probably right but in the short and even medium term there are a few major issues that have to be dealt with before oil can have another large bull run.

The main problem is what is referred to as the output gap. The output gap basically says that there is a gap between what we are producing and what we are able to produce. While a small gap almost always is existent right now it is very large. Until the economy actually starts to pick up some steam this gap will remain wide. As the economy produces less and less the need for commodities continues to decline.

This drop in demand for commodities has started to slow but it is still dropping. As we showed a few days ago in our post on port data, world shipping data and therefore world trade has dropped off a cliff.

LA and Long Beach Port Data

ports-of-lb-la-data

Until indicators like the Baltic Dry Index and port data start to turn up, oil and other commodities will have a hard time climbing back anywhere near $100 a barrel let alone the $150 we saw almost a year ago.

Another thing that continues to put pressure on oil is the extreme contango that we have seen this year. Contango in the futures market is when the near month contract is selling at a discount to the farther out contracts.

While a bit of contango is not unusal we have had some extreme readings this year. In fact at one point you could have bought oil in the cash market and by selling the contract six months out you would have locked in a 25% return minus the storage costs.

Over the past few months however the spread has narrowed but is still high enough to cause speculators to build up supply until it is time to deliver. Right now contango is at 10% from the June to September. This means that you could be buying oil now and lock in a 10% return. Until the premium is brought down closer to storage costs there will be a lot of artificial demand which depresses prices and makes it hard for oil to go up in a big way.

4-Month Contango Curve

contango

So until demand picks up and contango comes down we will likely not see a large sustained move up in oil. That being said there are and will be many trading opportunities to the long and short side, but we feel as though a long term bull move is still a ways off.

Happy Trading,

The Macro Trader

Dave@TheMacroTrader.com

P.S. If you are getting value out of our posts, you can do us a favor by linking to us with your site or blog and mentioning The Macro Trader to any of your friends that trade.

Port Traffic Rebounds….Sort of

Over on the Calculated Risk blog we saw today how they were talking about the rebound in port data using Los Angeles port data. Since we track the LA and Long Beach ports (they both publish data on their websites) we decided that we would take a closer look at this supposed 28.9% rise in total loaded containers.

Looking at the combined data we can see that not only have we had a strong rebound as of late but that it appears to have happened several times over the past few years.

Combined Port Data

loaded

After noticing that each year around this time ports have a drastic increase in total volume we broke the data down by month.  In the chart below you can see the March data from 1995 to now.

March Data

march

As evidenced by this chart it is obvious that March typically is a strong month.  In fact from 1995 to now it is on average the strongest month of the year.  The average gain from February to March is 10.69%.  The next best month on average is April with an average gain of 5.96%.

What this data shows is that while we did have a rebound of sort it appears to be a seasonal pattern that shows up almost every single year.  That being said the data is up and the economy could have turned and things could have changed……but we doubt it.

Happy Trading,

Dave@TheMacroTrader.com

P.S. If you are getting value out of our posts, you can do us a favor by linking to us with your site or blog and mentioning The Macro Trader to any of your friends that trade.