Baltic Dry Index gains above 700 points for the first time in 2016

UNITED KINGDOM April 27 2016 3:36 PM

LONDON (Scrap Register): The main sea freight index at Baltic Exchange for ships carrying dry bulk commodities gained 600 points on Tuesday for the first time in 2016 as renewed optimism into the health of the global economy is combining with a tangible increase in demand to lift it well away from its recent, record lows. 

The Baltic Dry Index, which provides an assessment of the price of moving the major raw materials – such as coal, iron ore and grain – by sea by taking in 23 shipping routes measured on a time charter basis, shot up by another 38 point to 638 points on Tuesday.

Long watched by some economists as a global trade bellwether, the index came to mainstream prominence in the wake of the global financial crisis. 

Now, due to the lag time from recognizing an increase in demand to having a ship ready to transport goods, by the time ships were ready demand had collapsed. This glut of ships available to transport goods sent the BDI, which measures the rates paid to hire ships of different sizes to transport goods, on a tailspin. 

The index is based on a daily survey of agents all over the world. Baltic Dry hit a temporary peak on May 20, 2008, when the index hit 11,793. The lowest level ever reached was on February 10 2016, when the index plummeted to 290 points.