Baltic Dry Index Approaching Old Highs
About a year ago, we looked at the Baltic Dy Index as it hit new highs.
At the time, we noted it reflected "global growth, especially Asia and to a lesser degree, Europe. We also discussed that growth in the BDI reflects a shortage of shipping vessels as much as it does demand for shipping.
The Baltic Dry Index recently tumbled 40% -- on recession fears? new shipping capacity concerns? -- but has since recovered much of that loss.
I view these charts as encouraging, with an asterisk. Why not fully encouraging? Because of the other legitimate ways you can interpret this price action:
- Ongoing lack of capacity -- with many more ships coming on line over the next 10 years, the tight supply constraints will not be alleviated until much later this decade;
- High prices of Commodities allows shippers some pricing room;
- Marginal Demand increases from China, India and Brazil;
Bottom line: Watch the recent highs for a confirming breakout -- a run through 10,630 or so could lead to a move towards 11,500.
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Here is the latest few charts:
Monday, May 12, 2008 | 11:30 AM | Permalink
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Just from looking at the chart, I'd say there is fairly strong inverse correlation between US fed funds rates and the Baltic Dry Index.
Posted by: DonKei | May 12, 2008 11:36:09 AM
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