Baltic Dry Index Advances 20 Days in a Row
The Baltic Dry Index came close to reaching an 8-month high today, closing above 3,000 for the first time since early October, and hitting the highest level since September 30. The shipping index has advanced for each of the last 20 sessions, and the 222 point increase today was the largest one-day increase since early July 2008.Update:
FT.COM --Rising demand for raw materials in China has led to a sharp recovery in the Baltic Dry Index, the benchmark for freight costs for dry bulk commodities such as iron ore, coal and grains.
The Baltic Dry jumped 7.6 per cent to 3,164 points on Wednesday, pushing through the 3,000-points mark for the first time since October as shipping congestion outside China’s ports reached record levels with 80 Capesized vessels awaiting unloading.
11 Comments:
"The above image, pulled today from Vesseltracker.com's Google Earth file, shows container ships languishing off the Singapore coast. Welcome to the largest parking lot on Earth. International Economy explains:
The world's busiest port for container traffic, Singapore saw its year-over-year volume drop by 19.6 percent in January 2009, followed by a 19.8 percent drop in February. As of mid-March 2009, 11.3 percent of the world's shipping capacity, sat idle, a record."
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Bobble - you should do more research regarding the quality of your sources. The article you linked to is utter nonsense.
The Singapore stock market has rocketed ahead more than 50 percent from it's recent lows.
So what. Domestic truck tonnage and rail traffic have declined for 20 days in a row.
The BDI is correlated (with a lag) to global commodity inflation not domestic economic expansion.
"All economics is local."
This article in the FT from a few weeks ago attempted to explain why China's economy could continue to grow while its exports shrink: Global Insight: Chinese tap an inner dynamic to drive growth. The continued strength of the Baltic Dry Index offers tentative support for the writer's thesis.
China is hoarding commodities as part of its attempt to diversify its trade surplus away from dollars. It won't stop buying American debt, of course, that would destroy its largest customer. But stocking up on raw materials is a great hedge against the feared Obama inflation to come.
Doesn't mean much. BDI is a measure of rates not volume. The distinction is crucial. Rates increase as shipping companies go bankrupt or leave the business.
Anon,
It's not just the BDI. Another recent FT article noted that China reported that it imported 57 million tons of iron ore last month -- its highest monthly total ever. Whether that will continue apace is another question.
Why the hell would anybody import iron ORE? Wouldn't it be cheaper to smelt it in situ?
I assume it's cheaper to import iron ore from Australia and turn it into steel in China than it is to import steel from Australia, but even if it isn't, I can see why the Chinese would want to smelt the ore in China: more jobs for Chinese workers.
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