The shipping sector-related exchanged traded fund is navigating rough waters as the slowing global economy, notably weakness in China, has sent the shipping industry’s most-observed measure for hauling commodities to record lows.
The Guggenheim Global Shipping ETF (NYSEArca: SEA), which tries to reflect the performance of the Dow Jones Global Shipping Index and holds high dividend-paying companies in the global shipping industry, dipped 0.1% Tuesday and was trading near all-time lows. SEA has declined 24.7% year-to-date.
The Baltic Dry Index dropped 4.7% to 484 points, its lowest level since Baltic Exchange data was first kept track in January 1985, reports Manisha Jha for Bloomberg.
Pressuring the industry industry, China, which makes about half the world’s steel, is on track for the largest drop in output for over two decades. China’s combined seaborne imports of iron ore and coal – materials that helped fuel the Chinese economic engine – are experiencing their first annual declines in at least a decade.
Additionally, the weaker-than-expected growth in 2015 has disappointed analysts’ expectations after many observers anticipated a strong rebound off of 2014. At the end of last year, shipping analysts projected rates for Capesize-class vessels would rise by about a third in 2015, but observers now expect rates to decline by about the same magnitude due to the global weakness.
“It doesn’t help that Chinese steel production is about to see the most dramatic decline to the lowest in 20 years,” Herman Hildan, a shipping-equity analyst at Clarksons Platou Securities, told Bloomberg. “Demand growth is collapsing.”