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BDI Index Charts and Quotes

This allows refiners and shippers to increase the supply of dirty and clean tankers as volumes grow. Third, tankers have some ability to switch from dirty to clean cargos and vice versa, as supply/demand dynamics shift within the dirty and clean sectors. Tankers can be loaded or unloaded within a day or so and prepared for a new voyage within days. Dry bulk ships require a week or more to load or unload cargo, and it can take weeks to clean and prepare a ship for new cargo.

  1. For example, when times are good, shippers are flush with cash that is, more often than not, spent on new ships.
  2. It is reported around the world as a proxy for dry bulk shipping stocks as well as a general shipping market bellwether.
  3. Many consider a rising or contracting index to be a leading indicator of future economic growth.
  4. The BDI is a summary indication of the cost to ship bulk cargo over 20 standard ocean routes (the Appendix has a list of routes).[1] In other words, it indicates dry bulk shipping rates.
  5. The Baltic exchange publishes a variety of spot freight rates, which are the basis for settling these contracts monthly.

It set rules for trading and transacting a wide range of raw materials. It started compiling pricing information on various commodities and disseminating them in an early version of indices. By the second half of the 19th century, it was becoming more international, and its scope expanded to include agricultural commodities.

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It takes an assessment of nearly two dozen major shipping routes to gauge the rate of ships carrying dry commodity goods like coal, iron ore, and grain. When shipping rates are down due to slowing demand for commodities, it pulls the index lower. As such, the index is said to forecast economic storms that are brewing out at sea. However, like most weather forecasts, it’s not always accurate as a range of factors can cause the index to forecast sunny economic times when a storm is actually about to make landfall. So, marginal increases in demand can push the index higher quickly, and marginal demand decreases can cause the index to fall rapidly. The BDI is a summary indication of the cost to ship bulk cargo over 20 standard ocean routes (the Appendix has a list of routes).[1] In other words, it indicates dry bulk shipping rates.

The Baltic Exchange publishes several other lesser-known freight indices, including two tanker indices and, more recently, a containership index. The containership index is not available on Bloomberg, but the tanker indices have been published since 1997 (Chart 5). During more extended slowdowns, shipowners may remove ships from service or scrap older and more inefficient ships. The BDI predicted the 2008 recession in some measure when prices experienced a sharp drop. Then, into 2021, the BDI rose dramatically as the pandemic led to snarls and delays in global shipping. Stock prices increase when the global market is healthy and growing, and they tend to decrease when it’s stalled or dropping.

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Panamax cargo ships require specialized equipment for loading and unloading. It is possible to trade the Baltic Dry Index using forward freight agreements, which cover various shipping routes. The Baltic exchange publishes a variety of spot freight rates, which are the basis for settling these contracts monthly. It is impossible to trade the Baltic Dry Index directly because it is not an investible index. The index can fall when the goods shipped are raw, pre-production material, which is typically an area with minimal levels of speculation.

Dry shipping is the transportation of dry cargo by ship in an enclosed container. Dry cargo includes commodities such as metal ores, coal and grains but excludes oil, gas, chemicals, etc. It is a composite shipping and trade index issued daily by the London-based Baltic Exchange. The BDI is a measure of the cost of transporting raw materials worldwide. Dry bulk cargo does not include tankers that ship oil, refined products, or chemicals; container ships; or roll-on ships, which carry vehicles that can be driven or rolled on board.

This analysis was based on the fleet composition, vessel utilisation including ballasting and total cargo moved – based on import/export reports and AIS data, the BDI weightings will be reviewed on an annual basis. The decision to not include Handysize contributions makes no statistical difference to the calculation of the BDI, based on the above weightings. Chart 3b shows the period that the Capesize has been published and rebased to match the BDI at inception to better illustrate relative volatility. When demand for commodities is high, there is a strong bid for Capesize ships; freight prices rise both because there a fewer of them and because they are the most efficient way to ship large volumes. Likewise, when commodity demand softens, people do not need the volume that Capesize offers.

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These weights are based on the volume of cargo (in dwt) shipped on each type. Dry bulk ships account for about 22% of the global merchant fleet (Chart 1). And they account for 30% of the total value of $14 trillion of cargo shipped annually. Every working day, a panel of international shipbrokers submits their assessment of the current freight cost on various routes to the Baltic Exchange.

There have been brief periods when the Capesize index dropped below zero, implying that shippers were losing money to keep their ships busy. The BDI jumped six-fold last year as the global economy recovered from the Covid slowdown, spurring a sudden demand for raw materials. Meanwhile, congested ports meant that bulk carriers had to wait weeks or more to load and unload cargo, effectively curtailing the supply of available ships. This category can also include some massive vessels with capacities of 400,000 DWT.

The index can experience high levels of volatility if global demand increases or suddenly drops off because the supply of large carriers tends to be small with long lead times and high production costs. The most direct instrument is forward freight agreements, which cover various shipping routes. The smallest vessels included in the BDI are Supramaxes, also referred to as Handymaxes (or Handysize). They’re sometimes Although they’re close in size to Panamaxes, Supramaxes normally have specialized equipment for loading and unloading, and they’re used in ports where Panamaxes cannot. The Baltic Exchange also operates as a maker of markets in freight derivatives, including types of financial forward contracts known as forward freight agreements.

The BDI is a fundamental leading indicator of global economic activity and a technical indicator of freight industry capacity. For much of its history, the BDI has traded in a range between 1000 and 2000 (see the Baltic Dry Index chart below, Chart 2). It typically falls as recessions approach and leads the recovery out of recession. External research concluded that the contribution of the various dry bulk vessel types to the dry bulk market was 40% Capesize, 25% Panamax, 25% Supramax and 10% Handysize.

Capesize ships primarily transport coal and iron ore on long-haul routes and are occasionally used to transport grains. It is called a Capesize vessel because it is too large to travel through the Panama and Suez canals and so must traverse the Capes of Good Hope and Horn. The Baltic Dry Index (BDI) is one of those more obscure financial indicators that turn up in the financial press when freight shipping rates break out of comfortable well-established ranges. Unfortunately, there is often little accompanying analysis to help investors decode what is driving these changes and how to capitalize on them. This article aims to help investors understand the BDI, think through what changes in it might mean, and learn how to take advantage of them. Panamax ships have a 60,000 to 80,000 DWT capacity, and they’re used mostly to transport coal, grains, and minor bulk products such as sugar and cement.

What Is the Baltic Dry Index?

The Baltic Exchange compiles the daily hire rate in USD from international shipbrokers for three types of bulk freight ships. 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 trade bitcoin options and futures being traded or moved in various markets (supply and demand). First, the growth in global demand over time for fossil fuels has been more steady than for various dry bulk commodities. Second, OPEC (for the most part) has worked to keep oil supply growth roughly in line with growth in demand.

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