The Shipping News
The best economic indicator you've never heard of.
By Daniel Gross Oct. 24, 2003
Since 1744, the Baltic Dry Index (BDI) has been providing a window into the the shipping market and has served as an accurate barometer of the volume
of global trade. The BDI deals with the precursors to production: bulk carriers carrying building materials, cement, grain, coal, and iron. Unlike
stock and bond markets, the BDI "is totally devoid of speculative content.
The BDI is a very good leading indicator. Movements in the Baltic Index tend to precede movements in global stock markets. But the index also tends to
presage higher interest rates. When more stuff is being shipped around the world, it needs to be financed. And that creates a greater demand for
On 20 May 2008 the index reached its record high level since its introduction in 1985, reaching 11,793 points. Half a year later, on 5 December 2008,
the index had dropped by 94%, to 663 points, the lowest since 1986, though by 4 February 2009 it had recovered a little lost ground, back to 1,316.
These low rates moved dangerously close to the combined operating costs of vessels, fuel, and crews.
By the end of 2008, shipping times had been already increased by reduced speeds to save fuel consumption, but lack of credit meant the reduction of
letters of credit historically required to load cargoes for departure at ports. Debt load of future ship construction was also a problem for shipping
companies, with several major bankruptcies and implications for shipyards. This combined with the collapsing price of raw commodities created a
perfect storm for the world's marine commerce.
By October of 2009 the index had recovered to around 2,900, a level that is more historically normal.
Insiders look at the Baltic Dry Index to see where the economy is at any time. Right now there are basically no goods coming in and we're using up
our reserves that we have in warehouses. However, nothing is coming in to take the place of the once warehoused items. The necessities that Americans
are so accustomed to seeing in the store are disappearing.
MUST SEE Video of the Global Shipping Situation
Shipping Slows Down – World
“No other industry has benefited more from globalization than the shipping industry. Yet in the wake of the recession, ship owners, shipyards and
crews are all finding themselves struggling to survive. We have been stuck here with no food and no gasoline. We cannot send money to our families."
Francis is a sailor from Ghana. For months, he has been stranded on a rusty tanker in the port of Las Palmas. When the owners went bankrupt, the crew
was left hanging with no means of getting home. Situations like these are common in ports all over the world. A ship usually has several owners;
banks, pension funds and private individuals, and everyone washes their hands of it.
Are the “Somali pirates” the MSM reports on really out of work commercial shipping hands who in order to feed their families have to congregate
and commandeer cargo vessels that are still sailing as they exit the Strait of Hormuz to get to the open ocean?
Has the world’s shipping industry been in a slow collapse since September of 2008?
What will happen to the availability of food and other necessary consumer goods such as fuel in the U.S. if the domestic railroad industry and the
global shipping industry both collapse?