Advertisement

Baltic Dry Index

The Baltic Dry Index is a key barometer of global freight activity – measuring the cost of ferrying raw materials around the planet.

The Baltic Dry Index is a key barometer of global freight activity measuring the cost of ferrying raw materials around the planet. Despite its name, it isn't just about Scandinavia. It's published by London's Baltic Exchange, the global marketplace for buying and selling shipping contracts.

The BDI measures the demand for space on so-called 'dry bulk carriers', which carry cargoes such as coal, grain, timber, steel and iron ore. That makes it a 'leading' economic indicator. Manufacturers need to buy supplies of raw materials before they can churn out finished products. So a pick-up in industrial activity will show up in the BDI - as producers stock up on raw materials - before it appears in the official production statistics.

Advertisement - Article continues below

And as the supply of shipping capacity tends to stay relatively unchanged over the short-term it takes up to two years to build a new ship, and most carrier operators are reluctant to scrap their vessels unless they have to it doesn't take a big increase in demand for transport space to push the BDI higher. Simliarly, a downturn will tend to show up in the BDI first.

Advertisement
Advertisement

Recommended

Visit/glossary/bonds
Glossary

Bonds

A bond is a type of IOU issued by a government, local authority or company to raise money.
19 May 2020
Visit/spending-it/glossary/601300/quantitative-investing
Glossary

Quantitative investing

Quantitative investing uses sophisticated computer-based mathematical models to identify and carry out trades.
8 May 2020
Visit/glossary/quantitative-easing-qe
Glossary

Quantitative easing (QE)

Quantitative easing (QE) involves electronically expanding a central bank's balance sheet.
8 May 2020
Visit/glossary/600702/emerging-markets
Glossary

Emerging markets

An emerging market is an economy that is becoming wealthier and more advanced, but is not yet classed as "developed".
24 Jan 2020

Most Popular

Visit/investments/commodities/industrial-metals/601401/money-printing-infrastructure-base-metals-copper
Industrial metals

Governments’ money-printing mania bodes well for base metals

Money is being printed like there is no tomorrow. Much of it will be used to pay for infrastructure projects – and that will be good for metals, says …
27 May 2020
Visit/economy/eu-economy/601422/heres-why-investors-should-care-about-the-eus-plan-to-tackle-covid-19
EU Economy

Here’s why investors should care about the EU’s plan to tackle Covid-19

The EU's €750bn rescue package makes a break-up of the eurozone much less likely. John Stepek explains why the scheme is such a big deal, and what it …
28 May 2020
Visit/investments/funds/601385/in-support-of-active-fund-management
Funds

In support of active fund management

We’re fans of passive investing here at MoneyWeek. But active fund management has its place too, says Merryn Somerset Webb.
25 May 2020