Shipping capacity available

While CNBC, and the consensus investment community broadly, have been focused on the global credit situation, we have had our “Eye” on the Baltic Dry Index, which is making multi-year lows. The Baltic Dry Index is a proxy for world trade as it tracks shipping rates for large ships that move dry goods and commodities around the globe.

The chart below outlines rates for Capemax, SupraMax, Panamax and Handysize ships, whose day rates have imploded since the July/August 2008 time frame. Collectively these ship types transport more than 95% of the dry bulk goods (primarily cement, coal, iron ore, and grain) around the world.

As per Wikipedia:

“Because dry bulk primarily consists of materials that function as raw material inputs to the production of intermediate or finished goods, such as concrete, electricity, steel, and food, the index is also seen as a good economic indicator of future economic growth and production, termed a leading economic indicator because it predicts future economic activity.”

We couldn’t have said it better. Declining shipping rates means growth is slowing and will likely continue to slow. For those “Fast Money” enthusiasts who believe global growth is going to bail out the U.S. economy, it may be time to study the chart below.

It’s global this time, indeed.

Daryl Jones
Managing Director

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