Before you ask yourself the question’ What is the Baltic Dry Index and why should I care if it drops?’, consider…
Consider that the article titled ‘The Baltic Dry Index Falls To Historic Lows! One Question Though….’ was written only ONE MONTH AGO when the BDI broke 400 for the first time ever (Note: The peak of the BDI was May 20, 2008 when the index hit 11,793)!
What is the Baltic Dry Index and why should anyone care about its historic fall?
This is a brief definition of the Baltic Dry Index (BDI) and the potential global economic growth implications of its continued decline…
Baltic Dry Index: A shipping and trade index created by the London-based Baltic Exchange that measures changes in the cost to transport raw materials such as metals, grains and fossil fuels by sea. The Baltic Exchange directly contacts shipping brokers to assess price levels for a given route, product to transport and time to delivery (speed)…
…Changes in the Baltic Dry Index can give investors insight into global supply and demand trends. This change is often considered a leading indicator of future economic growth (if the index is rising) or contraction (index is falling) because the goods shipped are raw, pre-production material, which is typically an area with very low levels of speculation. (Source)
So given that the BDI can provide insight into the direction that the global economy is heading, what is it telling us now?
To reiterate and emphasize, that was written on January 16, 2016 when the century milestone of 400 had been broken to the downside for the first time in history!
And, once again, you may still be asking yourself why you and your business along with me and my real estate related title insurance business should give a damn about global shipping? Because regardless of industry the BDI is an important economic indicator of the direction that economic activity is heading!
Leave A Comment