The Baltic Dry Index covers dry bulk shipping rates, or the costs of moving raw materials by sea.
Shipping costs vary according to the type of commodity being shipped, the amount (supply and demand).
This index is managed by the Baltic Exchange in London and the data can be directly subscribed to by major financial news services as well as the Baltic Exchange.
How the Baltic Dry Index Works
The Baltic Exchange calculates the index by assessing multiple shipping rates across more than 20 routes for each BDI component vessel. Analyzing multiple geographic shipping paths for each index gives depth to the index's composite measurement. Members contact dry bulk shippers worldwide to gather their prices, and they then calculate an average. The Baltic Exchange issues the BDI daily.
A change in the Baltic Dry Index can give investors insight into global supply and demand trends. Many consider a rising or contracting index to be a leading indicator of future economic growth. It's based on raw materials because the demand for them portends to the future. These materials are bought to construct and sustain buildings and infrastructure, not when buyers have either an excess of materials or are no longer constructing buildings or manufacturing products.
The Baltic Exchange also operates as a maker of markets in freight derivatives, including types of financial forward contracts known as forwarding freight agreements.
The Sizes of BDI Vessels
The BDI measures shipments on various sizes of cargo ships. Capesize boats are the largest ships in the BDI with 100,000 deadweight tonnage (DWT) or greater. The average length of a Capesize vessel is 156,000 DWT. This category can also include some massive vessels with capacities of 400,000 DWT. Capesize ships primarily transport coal and iron ore on long-haul routes and are occasionally used to transport grains. They're too large to cross over the Panama Canal.
Panamax ships have a 60,000 to 80,000 DWT capacity, and they're mainly used to transport coal, grains, and minor bulk products such as sugar and cement. Panamax cargo ships require specialized equipment for loading and unloading. They can barely squeeze through the Panama Canal.
The smallest vessels included in the BDI are Supramaxes, also referred to as Handymaxes. These ships have a carrying capacity of 45,000 to 59,999 DWT. They're sometimes, Although they're close in size to Panamaxes, Supramaxes typically have specialized equipment for loading and unloading, and they're used in ports where Panamaxes cannot.