The Baltic Dry is all wet

Published: July 18 2010 19:52 | Last updated: July 19 2010 09:34

Any financial analyst worth his or her salt will conduct a sanity check when prese
nted with a number that seems like an outlier. That is certainly warranted after
a rapid decline in the Baltic Dry index from above 4,000 to about 1,700 in two
months. The BDI measures prices for carrying dry bulk such as industrial commodi
ties by sea and has been widely used as an unofficial economic barometer. If it
is to be believed, a double-dip recession must surely be upon us after an epic s
tring of consecutive declines that matches the longest such spell since the 2001
recession.
Several analysts have poured cold water on the BDIs prescience, though, given som
e obvious distortions. It takes about three years to build fresh capacity and, b
ecause the peak of the commodities bubble was two to three years ago, new ships
are now depressing charter rates. The global fleet has expanded by about a quart
er this year alone. For now, other indicators of commodities demand trump the BD
I
For now, other indicators of commodities demand trump the BDI including measures
of rail traffic