Baltic Dry Index actually drying up
The Baltic Dry Index represents the cost of shipping commodities like coal or soybeans in cape-sized vessels. And the cost has fallen sharply. Stephen Beard explains why this index is often a yard stick for the world economy.
A cargo ship passes through the Panama Canal (Elmer Martinez/AFP/Getty Images)
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Bill Radke: It's hard to picture a global recession. Visualize a giant ship chugging around the tip of Africa loaded with coal or soybeans. The cost of shipping those commodities is tracked in something called the Baltic Dry Index. Marketplace's Stephen Beard has been watching it sink.
Stephen Beard: The Baltic Dry Index has fallen by almost 90 percent since May. Back then, the cost of hiring the biggest bulk vessels was $240,000 a day. Today, it's just $9,000.
These are the cape-size ships -- too big to get through either the Panama or the Suez canals. So they go around the capes. They carry raw materials like coal, iron ore and wheat. The collapse in demand for these vessels is largely due to a sharp fall in demand from China.
The drop in the Baltic Dry Index is an ominous sign, says David Osler of the Lloyds List shipping journal:
David Osler: Often it's seen as a leading indicator of the world economy because these kind of ships are carrying such crucial raw materials. Yeah, the real fear has to be some sort of prolonged slump.
He says another reason for the big fall in the index has been a number of new ships have arrived on the market just as global trade is slowing down.
In London, this is Stephen Beard for Marketplace.
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03/10/2009
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