Baltic Dry Index
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Most directly, the index measures the demand for shipping capacity versus the supply of dry bulk carriers. The demand for shipping varies with the amount of cargo that is being traded or moved in various markets (supply and demand). The supply of ships (cargo transports) is much less elastic than the demand for them, so the index indirectly measures global supply and demand for the commodities shipped aboard dry bulk carriers, such as building materials, coal, crude oil, metallic ores, and grains.
Because dry bulk primarily consists of materials that function as raw material inputs to the production of intermediate or finished goods, such as concrete, electricity, steel, and food, the index is also seen as an efficient economic indicator of future economic growth and production. The BDI is termed a leading economic indicator because it predicts future economic activity.
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Impact of 2008 financial crisis
<b>On 21 May 2008 the index reached its record high level since its introduction in 1998, reaching 11793 points. Less than half a year later, on 4 November 2008, the index had dropped by 93%, to 815 points,</b> the lowest since 1999. These low rates move dangerously close to the combined operating costs of vessels, fuel, and crews.
By the end of 2008, shipping times had been already increased by reduced speeds to save fuel consumption, but lack of credit meant the disappearance of letters of credit, historically required to load cargoes for departure at ports. Debt load of future ship construction was also a problem for the companies, with several major bankruptcies and implications for shipyards.[10][11] This, combined with the collapsing price of raw commodities created a perfect storm for the world's marine commerce. Cheaper fuel was no longer able to offset this situation and global letters of credit are beyond the powers of the Federal Reserve.<!--QuoteEnd--><!--QuoteEEnd-->
The Baltic Dry Index: The Only Economic Indicator Worth Tracking Right Now
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If you want to know when the global slowdown thatâs erased $28 trillion in wealth (so far) will finally reverse course, pay attention to the obscure Baltic Dry Index. And nothing else. Hereâs whyâ¦
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In light of the above, it doesnât take a market maven to predict what direction the indexâs been heading lately - practically straight down. Hereâs the thing. The Baltic Dry Index started plummeting in early June, before the global equity markets went into a tailspin, proving its predictive abilities.
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Most directly, the index measures the demand for shipping capacity versus the supply of dry bulk carriers. The demand for shipping varies with the amount of cargo that is being traded or moved in various markets (supply and demand). The supply of ships (cargo transports) is much less elastic than the demand for them, so the index indirectly measures global supply and demand for the commodities shipped aboard dry bulk carriers, such as building materials, coal, crude oil, metallic ores, and grains.
Because dry bulk primarily consists of materials that function as raw material inputs to the production of intermediate or finished goods, such as concrete, electricity, steel, and food, the index is also seen as an efficient economic indicator of future economic growth and production. The BDI is termed a leading economic indicator because it predicts future economic activity.
..
Impact of 2008 financial crisis
<b>On 21 May 2008 the index reached its record high level since its introduction in 1998, reaching 11793 points. Less than half a year later, on 4 November 2008, the index had dropped by 93%, to 815 points,</b> the lowest since 1999. These low rates move dangerously close to the combined operating costs of vessels, fuel, and crews.
By the end of 2008, shipping times had been already increased by reduced speeds to save fuel consumption, but lack of credit meant the disappearance of letters of credit, historically required to load cargoes for departure at ports. Debt load of future ship construction was also a problem for the companies, with several major bankruptcies and implications for shipyards.[10][11] This, combined with the collapsing price of raw commodities created a perfect storm for the world's marine commerce. Cheaper fuel was no longer able to offset this situation and global letters of credit are beyond the powers of the Federal Reserve.<!--QuoteEnd--><!--QuoteEEnd-->
The Baltic Dry Index: The Only Economic Indicator Worth Tracking Right Now
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->..
If you want to know when the global slowdown thatâs erased $28 trillion in wealth (so far) will finally reverse course, pay attention to the obscure Baltic Dry Index. And nothing else. Hereâs whyâ¦
..
In light of the above, it doesnât take a market maven to predict what direction the indexâs been heading lately - practically straight down. Hereâs the thing. The Baltic Dry Index started plummeting in early June, before the global equity markets went into a tailspin, proving its predictive abilities.
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