Thursday, March 12, 2009

The Baltic Dry Index at Five Month High

The Baltic Dry Index, a measure of shipping costs for commodities, rose to its highest level since Oct. 9 on demand to ship South American grains, reports Bloomberg. The index advanced 37 points, or 1.7 percent, to 2,262 points, according to the Baltic Exchange. Rates to hire so- called panamax vessels, used to haul grain, climbed 3.9% and have jumped 59% on a nine-day run to $18,562 a day.

Here's Susan Lee on the Index as a leading indicator:

I suggest you watch an index that will tell you when the world economies are starting to perk up and when trade conditions are really starting to ease. It's called the Baltic Dry Index.Essentially the Baltic Dry tracks the average daily price for shipping dry bulk like coal, iron ore, wheat and soybeans. There are three things that make it such a good leading indicator. One, the index looks at raw materials, so it captures activity at the very beginning of the production process. Two, it looks at ocean shipping, so it reveals what's happening to international trade -- the critical driver of global growth. And, three, the shipping business depends heavily on credit, so the Baltic Dry indicates whether credit is tight or loose.


1 comment:

  1. It's worth noting the following written on March 11, 2009 by Dennis Gartman, someone who's followed the BFI long than just about anyone else in finance:

    "Finally, much is being written about the recent sharp rise in the Baltic Freight Index. As one of those who helped bring the BFI to Wall Street’s collective attention more than fifteen years ago, we think we have something reasonable to say regarding what is going on there, and we say this: SIT DOWN; TAKE A DEEP BREATH AND RELAX! There is little to be gained from becoming too excited about the recent rise in the BFI as it has gone from just under 1100 late last year to 1985 presently. Yes, this is an 80% rise from
    the lows and when seen in only this light one might come away with the notion that things are indeed getting better, economically, out there. One, however, would be wrong, for we must remember that the BFI was 11,650…. Nearly six times higher than it is presently… only a year ago. Rather than seeing the BFI having risen 80% from last year’s lows, we think it is far wiser to remember that at its lows it was 95% below the highs. The strength recently is but a shadow of what was lost; the recent strength is little more than a very dead cat bounce; the recent strength is a veritable “blip” on the economic radar screen."