The Baltic Dry Index

The Baltic Dry Index (BDI) is a number issued daily by the London-based Baltic Exchange. You can monitor it here:Link.The index provides an assessment of the price of moving major raw materials by sea,

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.The supply of cargo ships is generally both tight and inelastic—it takes two years to build a new ship, and ships are too expensive to take out of circulation the way airlines park unneeded jets in deserts. So, marginal increases in demand can push the index higher quickly, and marginal demand decreases can cause the index to fall rapidly. e.g. If you have 100 ships competing for 99 cargoes, rates go down, whereas if you’ve 99 ships competing for 100 cargoes, rates go up. In other words, small fleet changes and logistical matters can crash rates.The index indirectly measures global supply and demand for the commodities shipped aboard dry bulk carriers, such as building materials, coal, metallic ores, and grains. Read more of this post