Baltic Dry Index Prices Down But Starting to Show Improvements

Let's share insights on international trade, D.Workman

Posted by
Daniel Workman
Apr 25, 2009

As mentioned in my article Baltic Dry Index Flags Global Recovery, the Baltic Exchange Dry Index is an objective measure of cargo shipping prices for moving raw materials such as iron ore, grain and coal by sea.

Shipping raw materials reflects real-world demand for manufactured goods. Brazil would never ship 100,000 tons of iron ore to China if there was no demand for the final products to be made from that cargo.

So how is the global economy doing according to the BDI?

According to the charts on InvestmentTools.com, the BDI stood at 1,873 as of April 24. That's down 77.4% since August 1, 2008.

The good news is that the BDI has trickled up for 3 of the first 4 months this year. The BDI suggested a decline in global shipping demand in March, which was followed by a small percentage uptick in April.

Economists sometimes describe the BDI as a leading indicator for global financial recovery. Some investors even claim that the BDI can predict stock market trends, including the prices for the S&P 500.

After studying the charts for both the BDI and the S&P, one could say that there is a general correlation between the two. However, these indices have gone up or down at the same time in only 4 of the past 8 months since August 1, 2008 - and for by widely varying percentages. (The percentage increase or decrease since August 1, 2008 is shown within brackets below.)

April 24: BDI was 1,873 (-77.4%); S&P500 was 866.23 (-31.3%).
April 1: BDI was 1,574 (-81%); S&P500 was 811.08 (-35.6%)
March 2: BDI was 2,014 (-75.7%); S&P500 was 700.82 (-44.4%)
February 2: BDI was 1,099 (-86.7%); S&P500 was 825.44 (-34.5%)
January 2: BDI was 773 (-90.7%); S&P500 was 931.80 (-26.1%)
December 1: BDI was 700 (-91.5%); S&P500 was 816.21 (-35.2%)
November 3: BDI was 827 (-90%); S&P500 was 966.3 (-23.3%)
October 1: BDI was 3,025 (-63.%); S&P500 was 1,161.04 (-7.9%)
September 1: BDI was 6,691 (-19.2%); S&P500 was 1,277.58 (+1.4%)
August 1: BDI was 8,280; S&P500 was 1,260.31.

Update: BDI hit 2,544 on May 15, 2009.