The Eurozone is China’s major trading partner. Most of the goods exchanged revolve around manufacturing or industrial products. Thus, when the region’s industrial production rises, it is common to see an increase in trade between the two partners, benefiting shipping companies that transport industrial related raw materials such as iron ore, oil, and coal.
December 2012′s readings on the Eurozone’s industrial production index rose to 96.5, an increase of 0.7 from the prior month. The chart above shows the seasonally adjusted index for the Eurozone’s industrial production excluding construction, provided by the Eurostat. The index is benchmarked to the region’s year 2005 industrial activity, representing 100. A decline in the index points to a fall in the region’s industrial production while an increase suggests a pick up.
December’s industrial production data supports other metrics such as the leading indicator and manufacturer’s purchasing manager’s index that have all been climbing lately1. This is positive for Eagle Bulk Shipping, Inc. (EGLE), Diana Shipping, Inc. (DSX), Teekay Corp. (TK) and Ship Finance International, Ltd. (SFL) that engages in the transportation of raw materials across the ocean. It is also a data point that may suggest the Eurozone’s industrial production is turning around. The Guggenheim Shipping ETF (SEA), which invests in leading shipping companies worldwide, should also benefit.
However, the index often moves in a zigzag form, so a six month simple average is also provided which reduces short term noises in industrial activity and smoothens out the data points. Using the six months simple average, the indicator has fallen to 97.5 from November 2012′s 97.8. Until the six month simple average begins to pick up, it is hard to say that the down trend is over or that Europe is recovering.
- See “Eurozone leading indicator supports ongoing turnaround” for a recent article on leading indicator ↩