“Another Wild Ride on the Baltic?”

The Baltic Dry Index has slid toward a two year low—almost unnoticed!

When last I wrote an article asking whether the Baltic Dry Index was telling us something about the economy it had fallen 33 straight days, to 1,790 (Jul 13,10), and two days later hit its low at 1,700 (Jul 15,10).

Last July the Baltic was sliding toward 1,500 seemingly contradicting the predictions of a growing economy and the rapid growth in China. And after reaching its low on July 15th the index began a steady rise to 4,507 in November.

Since that November high the BDI has steadily declined to 1,043 on Friday, and rose to 1065 on Tuesday. Part of the problem is the glut of new ships coming online as described by Ryan Eden in his article at The Street, “Dry Bulk Shippers Continue Deep Slide,” in January.

Is the BDI telling us something about the future of the global economy?

The big question is whether other problems exist that are reducing global shipping. The extreme weather disruptions in Australia has had an affect of dry bulk shipping. And, will the new problems of an overheated Chinese economy—causing the Chinese government to raise interest rates again today to slow inflation—slow shipping?

Though the Baltic Dry Index appears to be less of an indicator of the economy than it had been in the past, it slid 3,464 since its peak just two-an-a-half months ago and is possibly headed toward its January 2009 low of 772. As I discussed in, “Is the Baltic Dry Index Signaling Problems Ahead?” in December 2009, are we again sliding into “The Shipping Blues?

If the Baltic Dry Index is merely a measure of the glut then this is mainly a shipping problem. But if it’s an indicator of the future…

Get ready for another economic wild ride!

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