BALTIC DRY INDEX
The Baltic Dry Index (BDI) is a shipping and trade index created by the London-based Baltic Exchange that measures changes in the price of shipping raw materials such as iron ore, cement, grain, coal, and fertilizer around the world. It is a closely watched indicator of economic activity and global trade, as it reflects changes in demand and supply for these materials.
The Baltic Exchange started collecting data for the BDI in 1985, but the index was only officially introduced in 1999 and is now seen a benchmark for global dry bulk cargo. It consists of four sub-indices: the Baltic Capesize Index; the Baltic Panamax Index; the Baltic Handysize Index; and the Baltic Supramax Index. Each is updated daily and represents a different sector of the shipping industry.
The BDI has been on a volatile ride since the World Trade Organization introduced its new international trade rules in the mid-1990s. There have been several periods of sharp increases and decreases in the index, reflecting the underlying demand pressures in international trade. Since the 2008 global economic downturn, the BDI has been on a gradual downward trend, largely due to the declining demand for commodities and the resulting decrease in freight rates.
The index experienced a sharp turnaround in mid-2009 as freight rates began to recover along with the global economy. This spike was quickly followed by another period of sharp declines, largely due to the expiration of tax incentives for sea shipping and a slow down in Chinese demand for commodities. As the global economy slowly recovered from the recession, the BDI followed the same trend, gradually recovering from the lows of 2009.
The BDI has been on a general upward trend since May 2020, reflecting a rise in demand for commodities as the global economy slowly begins to recover from the pandemic. As the vaccine rollout continues and economies around the world begin to open up, the index is expected to rise further as demand for commodities increase.
The BDI is an important economic indicator and its movements serve as a proxy for global economic activity. It reflects the demand for commodities and the supply of ships available to carry them, helping to provide insight into the global economy. It is an important gauge of the health of the shipping industry as well as a useful indicator of global trade and economic activity.
