The Baltic Dry Index (BDI)

Everyone is talking about the BDI (Baltic Dry Index).

Analysts with absolutely no shipping knowledge and referencing it, taxi drivers are talking about it and mum and dad investors mention it, along with property prices and school fees.

So whats the scoop on the BDI and why is it so important.

Put simply, shipping, bulk shipping to be exact, is one of the worlds most pure markets. The actual physical movement of bulk goods represents what is actually happening in the real economy away from gossip, inuendo and a myriad of sometime meaningless facts and figures.

To explain better I like to compare ships to Taxi Cabs. Bulk ships are like Cabs in that they float around looking for employment. They will go where someone is willing to pay the most money. Therefore many of these ships, over the period of 12 months will visit 5 different continents, 10 different ports, never knowing only until the week before there current cargo is discharge, where they will end up next. It really is a global market.

Due to the nature of the market, a ship like any other tradeable commodity will have a fluctuating price depending on supply and demand. One day a ship can be worth usd 100,000 per day to hire and the nextday it could be worth usd 75,000 per day.

This then is the role of the Bulk shipping executive. Shipbroker, shipowners, freight traders and ship charterers meet in this market place 24/7 and vessels get 'fixed' at an ever changing market rate.

This also explains wy the BDI is so important. The BDI represents whats happening in international trade and hence the health of the wider world economies.

Cheers
The Virtual Shipbroker