Baltic Dry Index

Ignore the spin and follow the main story:

"Rates for shipping iron ore, grain, coal and other commodities
have fallen nearly 25% in the past six weeks, reflecting a slowdown in the
movement of many raw materials around the globe.

While the slowdown reflects a softening of world economic growth, [ignore:
the silver lining is lower transportation costs for a multitude of industries
such as appliance makers, chemical producers and even bakeries, which use such
materials in production processes].

Surging demand and a shortage of ships pushed freight rates to
record highs in December. But since then, the Baltic Dry Index, the main
indicator for commodity-freight rates, has fallen by more than half, with the
slide accelerating in recent weeks. Industry officials point to a recent cutback
in China’s imports, particularly of iron ore used in steel production, as the
driving force behind the precipitous decline. But the downturn has broader

"The reason these prices are coming down is because world growth
is slowing and U.S. growth is slowing," says Nariman Behravesh, chief economist
at Global Insight, an economic forecasting and consulting firm in Lexington,

(emphaisis added).


Growth is slowing globally. We see it in attenuating GDP data, as well as year over year changes in SPX profits.

Why people remain in some state of denial over this, I have no answer. Just accept what is instead of hoping for what migh be.


UPDATE June 15, 2005  10:01 pm

Dan Gross discussed the details of the BDI back in ’03:

Shipping News: The best economic indicator you’ve never heard of


Commodity-Freight Rates Slip As Global Growth Slows Down
China’s Cutback in Imports Plays Big Role in Decline; Shippers Await Better Prices
THE WALL STREET JOURNAL, June 13, 2005; Page A2,,SB111861000054757291,00.html

What's been said:

Discussions found on the web:
  1. scorpio commented on Jun 15

    when do u start to scale out of the market? back at the high end of the range, greenspan probly still raising rates (3.5-4.0%?), profits beggining to slow, higher dollar eating into profits, labor costs rising.

  2. john brown commented on Jun 15

    Yes worldwide transport rates are coming down, but so is the Dow Transports Index. Indeed, it has now fallen below its 200dma and the 50dma has crossed under the 200dma to boot , which confirms the crossover in the Dow Industrials . Does this have any Dow Theory implication?

  3. tesla commented on Jun 15

    Yes it does have dow theory implications, but confirmaiton is needed from the industrials first. With any luck, that should happen shortly.

  4. Dan commented on Jun 16

    One thing thats gone unnoticed but briefly mentioned above is that this year there has been a massive increase in capacity in shipping – ie more tankers. It takes 18mth – 2 years to build a ship. European ship makers have been flat out completing orders and hence have added more tankers, which ultimately means lower prices in terms of shipping costs. Whilst I dont disagree growth has stabilised, but increased capacity is also driving this Baltic Indices down

  5. Ling Hin Ching commented on Jun 23

    Could I subscribe your newsletters?


  6. AJ-160 commented on Jul 11

    I accept that the Baltic rates are in fact falling.
    However, I’m a manufacturer of heavy mining equipment here in Australia we deal directly with several of the major mining equipment people: Cat, Hitachi Euclid Komatsu etc. We also work with the top mining companies active here in Australia and Asia. We are looking at order books of large mining equipment at present stretching out for the next 3-4 years. I have been running this business since 1989 and we have never had this much work in front of us!!! Also on a recent trip to Mackay north Queensland one of my people observed (actual count) 54 ships lying of the Hay point coal loading area. Our many contacts tell us it’s the same at Newcastle NSW and at the other loading points in Queensland. There are two single track rail lines running from the two major Queensland coal fields out to the coast. Both of these lines are currently heavily used and in dire need of duplicating now. That’s without Anglo coal doubling its output in one of its lower Bowen basin coal mines (Dawson) we are also working with a far northern Queensland Bauxite company in increasing its hauling fleet from 160 tonne per truck to 195 tonne per truck.

    In my opinion for what it’s worth it could be that given the current bottle necks and other problems here in Australia (and in the USA powder river area I understand) we simply can not load the ships to meet current demand let alone the increases the mines are planning and buying equipment for.

    Either some very smart minds in the mining houses have judged the whole situation wrong or we are in the midst of a secular resource boom with growing demand from China, India and many other emerging economies.

    I feel a great deal of people are in denial I take no pleasure in $60 oil prices; however, I believe we will just have to learn to live with the increasing world demand and how this will change our economic world. When 350 to 500 million people wish to own a washing machine, dish washer and car as we do here how can you deny them.

    This is my personal perspective from inside a part of the mining equipment supply line. I know what I think and believe me my own money is where my mouth is!!!

    Do your own D.D and good luck: AJ- 160

  7. GEORGE ATMANJI commented on Jul 14

    The BDI is going to stabilize around the 2000 mark for the next 6-9 months. By 2nd quarter of 2006 we shall see it at 1500 mark and we shall also see some panicked shipowners selling their ships at about half price of what are asking today.
    Those who want to invest in buying ships, I strongly recommend to them to not buy now, it will be a destructive decision.

  8. john willis commented on Sep 8

    As the year of 2005 progresses the Baltic Dry Index will increase as the year end Chinese holidays affect the worldwide shipping industry.

  9. Edward Katz commented on Nov 13

    While the Baltic Dry Index has been dropping, other economic indicators aren’t following suit. In Canada, a 4% yield on long bonds suggests decent, though not outstanding, growth ahead. The S&P/TSX Composite Index is still well above the moving average. Canadian sales of common-equity mutual funds are down, which is a buy signal; and the Implied Volatility Index, which measures investors’ anxiety levels, is fairly stable—another good sign for stocks.

  10. Frank B commented on Nov 19

    How will the increased then decreased price of oil affect this index?

    I follow the NYSE stock symbol TEU as a proxy for trading and it has had a very great sign of strength over the past 6 months.

Posted Under