The Baltic Dry Index tracks the cost to ship dry bulk goods, i.e. grain, metal ores, coal and etc.(see chart 1) Baltic Capesize Index tracks the shipping costs on the largest of the dry bulk vessels, i.e. vessels that are in excess of 80,000 dwt.(see chart 2) Capesize vessels are viewed as primarily carry coal and iron ore vessels. The Baltic Capesize Index tends to fluctuate with the amount of steel being produced and reflects global economic activity. Over the last two weeks the Baltic Capesize Index has increased over 80%. The same two weeks the broader Baltic Dry Index has increased 21%. The Baltic Dry Index has increased over 470% from its low of 663 in Dec 5, 2008 to 3164 on May 27, 2009.
Most assume that speculators are not driving up the cost of vessels as the result of some speculative market activity and that these indices provide an untarnished view of world business activity. But, with the history of oil at $147bbl in 2008 still sharp in memory, it should always be considered that speculation could be playing a part in these indices. Regardless of the all the sources of these price increases, these indices are in line with the Port of LA activity regarding loaded containers which provides another reference point.(see chart 3)
That these charts reflect a substantial turn upwards in global business activity and psychology is a point that should catch the attention of all investors in my opinion.
Disclosure (“none” means no position):