Russ is correct. The Baltic Dry Index is at a record low.
There seems to be some confusion about what the
Baltic Dry Index is, and what it means.
It is
NOT a measure of how much stuff is being shipped. Rather it is a measure of the price of shipping stuff. Price, as always, is determined by supply and demand. "Supply" in this case is the number of ships available to move stuff. "Demand" is the amount of stuff people want to move. At present, the fleet of dry cargo ships is somewhat overbuilt (particularly by Chinese shipyards). And demand is somewhat down due to the slowing of the growth of the economy in China and other countries. A modest oversupply of ships coupled with a modest economic slowdown leads to a big drop in the index. Because ships are long term investments, it takes awhile before enough of the older ships in the world fleet are retired, so the supply side remains too big for a fairly long time, and hence the index stays low for a relatively long time.
Forbes has a nice article that explains this:
Explaining The Baltic Dry Index Plunge: It's Supply, Not Demand.
What the Baltic Dry is telling us is not that global trade has collapsed. Rather, that global trade isn’t growing as fast as the supply of ships capable of performing that global trade. Thus the price of trading has fallen.
Thus we don’t need to take this as an indication to batten down the hatches (unless we’re unfortunate enough to be ship owners) nor that the global economy is about to fall over. We don’t even need a public policy to deal with it. Low freight rates are great for the rest of us and the problem itself within the industry will be self solving. Some people will go bust, older ships will be scrapped and demand and supply will move closer together and the price will change again. This is precisely the sort of problem that the market unadorned deals with perfectly well.
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