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What is the Baltic Dry Index?

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  • Written By: Mary McMahon
  • Edited By: O. Wallace
  • Last Modified Date: 11 November 2016
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The Baltic Dry Index (BDI) is an economic indicator which reflects the costs involved in shipping dry goods by sea. Despite the name, the Baltic Dry Index actually covers transports on routes all over the world. It is issued daily in London by the Baltic Exchange, an organization which has its roots in the 1700s. While many consumers have never heard of the BDI, it can actually be a very important tool for assessing economic health and the direction of economic trends.

When the Baltic Dry Index is calculated, brokers all over the world are consulted to find out how much it would cost to book a cargo of dry raw goods. This includes commodities ranging from grain to steel. The Index is broken up by ship class, with indexes being provided for Capesize, Supramax, Panamax, and Handysize ships. It also averages costs across routes to give a more accurate reflection of overall trends; one route may be costly for a variety of factors while another may be relatively cheap and by averaging the Baltic Dry Index provides an overall picture.

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Also known as the dry bulk index, the BDI gives people an idea of how the dry raw goods market is behaving. This is an area of the market in which there are not very many speculators active, and movement can foresee economic trends, because in order to make consumer goods, companies need the dry raw goods used as materials. A rise in the Baltic Dry Index can suggest that more goods are being shipped, while a fall shows that there is less demand for these goods and probably indicates that a ripple effect is going to occur.

2008 marked a high point on the Baltic Dry Index, and this economic indicator lost a very high percentage of its value when the 2008 economic crisis unfolded. At one point, the index was so low that it indicated that shippers were barely breaking even when it came to paying for ships and crew. It wasn't until January 2010 that the Baltic Dry Index began to experience an uptick which suggested promising economic trends, after numerous sessions of steady decline.

There are various locations in which people can find the latest quote on the value of the Baltic Dry Index. Shipping publications are usually a good place to start. Websites which provide exhaustive coverage of various indices around the world will also usually have information on the BDI.

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