The Baltic Dry Index – an index of global freight rates for shipping dry commodities such as iron ore, coal and grain – had fallen for 23 consecutive days as of last Friday, cutting its value in half in the space of a month. The last time the index was this low, the world was in the depths of a credit crisis and a major recession.
While the Baltic Dry Index is obscure to your average retail investor, keen market watchers have long considered it a valuable leading indicator for the world economy, indicating shifting tides in demand for key industrial commodities.
Its plunge comes at a time when the prices for many key commodities remain buoyant – a disconnect that would traditionally suggest that commodities are poised for a fall.
But this time around, the Baltic Dry Index may not be signalling a slump in demand, as much as the growing supply of ships to carry them.