Monday, February 9, 2015

Baltic Dry Index, say what?

As ZH has been pointing out for a while, the Baltic Dry Index has been crashing recently and it is almost about to breach it's historical low of 554 set all the way back in 1986.

Why is this important? Well, according to Investopedia, the BDI has been a good leading indicator of global economic activity. The BDI crashing does not seem to go well with the narrative that "everything is awesome".

Bloomberg charts the BDI in case you are curious about it:

At 559, it is pretty darn low.

What does this mean for the rest of the global economy? Honestly, I'm not too sure, but I have a feeling that it isn't good.

On the other hand, what does this mean for shipping companies? Who are the shipping companies anyway? According to this report, the SGX lists 12, while there is also Rickmers and FSL as business trusts.

Perhaps a possible play in the future is that if these shipping companies can survive these tough times that they are already in, they may very well have plenty of room to prosper in the future when shipping rates move up.

However, I still don't think that the worst is over yet. It is nice though to work out which areas in the future might offer opportunities if all the factors needed happen to fall together in line. If the global economy does go down the toilet, shippers that survive this extra extended dry spell are going to look extremely good then.

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