Baltic Dry Index (BDI)

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Source: CMIE Economic Outlook, 1 Finance Research

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What does the Baltic Dry Index represent?

The Baltic Dry Index (BDI) is a shipping and trade index created by the London-based Baltic Exchange.
The index is calculated by assessing multiple shipping rates across more than 20 routes for each of the BDI component vessels. Analysing multiple geographic shipping paths for each index gives depth to the index's composite measurement.
It measures changes in the cost of transporting various raw materials, such as coal, iron ore, grain, and many other commodities. These are considered dry goods, as opposed to wet goods such as oil and gas.
The Baltic Dry Index (BDI) is a composite of the dry bulk timecharter averages that track different sizes of merchant ships, such as Capesize (40%), Panamax (30%), and Supramax (30%), each catering to different cargo volumes and routes and providing a continuous time series since 1985.

The Baltic Dry Index (BDI) provides insights into the global shipping and trade industry.
The Baltic Dry Index (BDI) measures the cost of moving major raw materials by sea, reflecting the supply and demand for shipping capacity versus the demand for raw materials globally.
The Baltic Dry Index (BDI) is solely driven by supply and demand dynamics of ships and cargo without direct influence from stock market speculation, making it a reliable indicator of the global trade environment.

A rising Baltic Dry Index signifies increased demand for shipping and typically, an improving global economic climate. Conversely, a falling Baltic Dry Index can be a sign of declining demand for commodities and a potential slowdown in global economic activity.
Short-term fluctuations in the Baltic Dry Index can be due to seasonal factors or temporary disruptions; long-term trends are more indicative of global trade health.
Changes in the Baltic Dry Index can be reflective of larger geopolitical events or economic shifts, such as major infrastructure developments, trade agreements, or global economic crises. It is important to note that the Baltic Dry Index only measures the cost of shipping raw materials and does not account for finished goods.