The Baltic Dry Index

[Joanne98]

This little chart was brought to my attention by the PGBlogger Blaster. As I am involved in the transportation business, I thought it was interesting. What it says about our immediate economic future is even more interesting. Let me share with you the importance of this little graph in the words of Wikipedia.

"According to Baltic Exchange, the index provides:
“…an assessment of the price of moving the major raw materials by sea. Taking in 26 shipping routes measured on a timecharter and voyage basis, the index covers Supramax, Panamax, and Capesize dry bulk carriers carrying a range of commodities including coal, iron ore and grain."

So what is the Index telling us about the current economic downturn?

"On 21 May 2008 the index reached its record high level since its introduction in 1998, reaching 11793 points. Less than half a year later, on 4 November 2008, the index had dropped by 93%, to 815 points,<7> the lowest since 1999. These low rates move dangerously close to the combined operating costs of vessels, fuel, and crews.<8><9>
By the end of 2008, shipping times had been already increased by reduced speeds to save fuel consumption, but lack of credit meant the disappearance of letters of credit, historically required to load cargoes for departure at ports. Debt load of future ship construction was also a problem for the companies, with several major bankruptcies and implications for shipyards.<10><11> This, combined with the collapsing price of raw commodities created a perfect storm for the world's marine commerce. Cheaper fuel was no longer able to offset this situation and global letters of credit are beyond the powers of the Federal Reserve."

Continued>>>
http://thedailygroundhog.blogspot.com/2008/11/baltic-dry-index.html

Chart at link

I play Investopedia and I bought Diana Shipping because they have no debt. Dryships is drowning in debt.

http://finance.yahoo.com/q?s=DSX

http://finance.yahoo.com/q?s=DRYS

[TheCoxwain]

1. My friend works for a ship broking company .. The same Dry bulker that was chatered at $65000 a day

on Labor day is now going for $5000 a day ....

Most of the small shipping companies will sink, excuse pun.

[tama]

2. More from wikipedia

"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 (supply and demand). The supply of ships (cargo transports) is much less elastic than the demand for them, so the index indirectly measures global supply and demand for the commodities shipped aboard dry bulk carriers, such as building materials, coal, crude oil, metallic ores, and grains.

Because dry bulk primarily consists of materials that function as raw material inputs to the production of intermediate or finished goods, such as concrete, electricity, steel, and food, the index is also seen as an efficient economic indicator of future economic growth and production. The BDI is termed a leading economic indicator because it predicts future economic activity.<2>"
http://en.wikipedia.org/wiki/Baltic_Dry_Index

[Joanne98]

3. Thanx Tama

[grasswire]

4. discussion on this topic

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=114&topic_id=47686