What is the Baltic Dry Index (BDI)

What is the Baltic Dry Index (BDI)

The Baltic Dry Index (BDI) is an index released by the Baltic Exchange in London. It includes the changes in the trading volume of dry bulk in the shipping industry. It is an economic indicator of the shipping industry and a leader in the global economy index.

The Baltic Exchange is the shipping market with the longest history and the only independent shipping information release organization in the world. Its members cover more than 600 companies in more than 40 countries around the world, covering the world's major shipping groups. The Baltic Exchange began publishing the first Baltic-calculated series of freight market indices, the Baltic Freight Index (BFI), in 1985. In 1999, the Baltic Exchange released BDI, which replaced BFI, and was regarded as a barometer of the trend of the international dry bulk shipping market.

The BDI index is calculated from the spot freight rates of the traditional global main dry bulk carrier routes, weighted according to their respective importance and proportion in the shipping market, and is a comprehensive indicator for measuring dry bulk carriers of different sizes. . The BDI is derived from three indices reflecting the freight rates of different classes of dry bulk carriers, namely, Capesize BCI, Panamax BPI, and Handy BSI.

When the global demand for major transported goods increases and the price of its own rises, the global demand for cargo ships increases accordingly, which drives up shipping costs, the BDI index rises, and the share prices of shipping companies rise. Therefore, BDI is not only an important index to study the future performance and stock price of listed shipping companies, but also reflects the global demand for primary commodities such as ore, grain and coal, and is one of the leading indicators of international trade and international economy.

The main factors affecting the BDI index are:

1) Global GDP growth rate;

2) The global transportation demand for primary commodities such as iron ore, coal mine, grain, and cement;

3) Global ship tonnage supply;

4) International average price of marine fuel oil;

5) War and natural disasters.

What is dry bulk shipping?

In terms of form, ocean transportation is generally divided into three forms: container transportation, dry bulk transportation and oil tanker transportation. Container transportation is mainly suitable for the transportation of downstream finished products, such as electronic products, clothing, automobiles, etc. The unit is TEU (standard container); dry bulk transportation is mainly suitable for the transportation of upstream primary products, such as iron ore, cement, etc. The unit is ton; tanker transportation is mainly suitable for the transportation of crude oil, liquefied natural gas and other liquid substances. Container transportation mainly reflects the demand for mid-stream and downstream products; while dry bulk shipping, as a transportation method for important primary products and raw materials, can better reflect the macro demand.

Reference value of BDI

A barometer of the global economy. The BDI measures the relationship between the global ocean freight capacity (the supply of freight capacity) and the quantity of primary commodities that need to be transported in international trade (the demand for freight capacity). Since the number of international shipping cargo ships is relatively fixed and the freight capacity is less elastic, BDI can reflect the global supply trend of primary products and raw materials, and to a certain extent, reflect the global economic situation. The rise of the BDI index indicates that the overall global economy is in good condition and international trade is hot.

It is positively correlated with the market price of primary commodities. As mentioned above, BDI reflects the international supply and demand of primary products, so there is often a positive correlation between BDI and the prices of primary products. When the prices of primary products, such as coal, iron ore, and grains, rise, the BDI generally rises in tandem.

It is positively correlated with the stock price of listed dry bulk shipping companies. BDI is an index that reflects the shipping costs of dry bulk cargo on major global routes. The increase in BDI indicates the increase in shipping costs, so the revenue of listed dry bulk shipping companies has increased, driving stock prices to rise. On the whole, there is a positive correlation between BDI and the stock price of listed dry bulk shipping companies, but the stock price of each listed shipping company is also affected by the domestic economy and stock market conditions, which may show a short-term deviation from the trend of BDI.