About a year ago, we looked at the Baltic Dy Index as it hit new highs.
At the time, we noted it reflected "global growth, especially Asia and to a lesser degree, Europe. We also
discussed that growth in the BDI reflects a
shortage of shipping vessels as much as it does demand for shipping.
The Baltic Dry Index recently tumbled 40% — on recession fears? new shipping capacity concerns? — but has since recovered much of that loss.
I view these charts as encouraging, with an asterisk. Why not fully encouraging? Because of the other legitimate ways you can interpret this price action:
– Ongoing lack of capacity — with many more ships coming on line over the next 10 years, the tight supply constraints will not be alleviated until much later this decade;
– High prices of Commodities allows shippers some pricing room;
– Marginal Demand increases from China, India and Brazil;
Bottom line: Watch the recent highs for a confirming breakout — a run through 10,630 or so could lead to a move towards 11,500.
Here is the latest few charts: