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The World's Best Known Global Shipping Index has Crashed To Its Lowest Level Ever
Having fallen for 47 of the last 51 days, The Baltic Dry Index (tracking the cost of shipping dry bulk from iron ore to grains) has been collapsing in a well-documented manner by Zero Hedge (though not the mainstream media). With Cramer having told investors of its importance previously, it will be hard to ignore the fact that, as of this morning, the index of global shipping costs has never (ever) been lower at 554. We leave it to readers to decide what they think this means (but we already know what it means for shippers and ship-building companies).
Recovery? "Crisis has passed?" You decide...
On the back of the total collapse in Chinese imports and exports, is this any surprise?
Of course, stocks know best...
Charts: Bloomberg
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Just a couple of quick observations here. The article says the BDI has fallen 47 out of 51 days but it's started to fall since the ending of QE3 which was 101 days ago. So why is this articles focusing on the last 51 days compared to the ending of QE3?
Also the BDI being the tracker of costs of shipping, maybe larger ships are being used to cut costs for the shipping rather than smaller ships to carry fewer goods.
Have shipping regulations and fees increased since then to force smaller whips to increase cost of shipping compared to the bigger shipping companies?
Crude oil has been dropping since June and the BDI was still trading up after that. Is this more related to the ports on the west coast who might strike and this is just hedging?
Is he drop related to possible outbreak of war in certain regions and they preparing for that?
Will I answer my own questions by asking more questions?
The only question I don't have is am I going to have a cup of joe today,
It seems that quite a number of ZH'ers are locked in a state of desperate denial. The world economy is flopping on its face.....Wake up!......it is chewing and choking on myriad mouthfuls of central banksters' propagandistic dust.
So FED should raise rates to fix it then?
Then again this could all be trending downward due to a deflationary spiral we are in.....for now.
I just ordered a bunch of fake Nike shoes from Alibaba. The BDI is going up big time now.
So what, the Fed-US Gov't-OnePartyMedia complex will continue to claim that U-3 is proof of the economic recovery and that's all that is need to continue in power.
Seems that before the west port shipping slow down a few months ago by the union and recent lock out, things were OKish.
I would caution people to take this fact into account rather than thinking it is all due to some economic structural slowdown.
Just a guess, but with the port slow down, fewer ships are available to bid for new cargo, therefore this should make the index go up....right?
Tyler, what would be very interesting to see is how the BDI is weighted....in other words, is it more impacted by a drop in iron ore shipments than grain? What dry goods are responsible primarily for the drop? Is it mostly due to rion ore and coal?
It would also be of interest to see who the bagholders are for the shipping industry debt.
"As has been indicated elsewhere in this article, much of the rise in the BDI is a result of the price being quoted in US Dollars, which have been falling. Therefore there is a strong correlation between the Euro Currency and the BDI. There would be an even better correlation between the BDI and the US Dollar Index, but inverse."
An older article written during the time period of the rapid rise in the BDI.
So the current strength of the $ currently is also contributing to the crashing BDI we now see.
There are several variables driving the BDI:
If the tonnage of shipped materials remians constant, but too many ships come on line to compete via lower rates, then the BDI drops.
If the tonnage falls and the same number of ships are still on line, then the competition to get cargo results in the BDI dropping.
Since the index is in U.S. $ then a stronger dollar results in the BDI dropping.
What would make an interesting chart would be the BDI versus the tonnage moving through the Panama Canal....one would expect a direct correlation.