Baltic Dry Index Accelerates Gains

Yesterday (Wednesday) the Baltic Dry Index (BDI) tacked on 14.6% to close at 1,318. The Capesize (BCI) and Panamax (BPI) indexes gained 13% each.

Here is a listing of the three Baltic indices, their recent low and date of low and gain since then:

• BDI: 663 on 12/05/08, now 1316, +98.5%
• BCI: 830 on 12/03/08, now 2380, +187%
• BPI: 442 on 12/11008, now 1000, +126%

The indices are now moving upward at a pace comparable to the downward run last fall. It will be interesting to see how long and far this rally carries. My tracking of the dry bulk stocks shows their results continuing to the positive and they average an 8.34% share price gain so far in 2009.

On the other side of the shipping world, it appears that rates are definitely softening for the oil tankers. The oil price cantango storage trade is winding down and the OPEC production cuts are real and affecting the amounts of oil that need to be shipped. The VLCC spot market oil tanker companies will see their margins squeezed for the foreseeable future. In the tankers I still like Nordic American Tankers (NAT) with their low daily costs and only Suezmax size tankers.

Much has been written about the BDI being a leading indicator of global economic recovery. If this is true, the economic turnaround may come sooner than many expect.

Note: I currently have a long position in NAT.

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Comment by mario cavolo

2009-02-06 00:10:53

Hi Tim, yep, interesting to watch the BDI….correct me if I’m not thinking right, there shouldn’t be any “rallies” type of thinking in this little guy; it tracks the level of shipping orders and so should simply be a steady advance indicator of the state of the economy. Nice we can position it now with SEA. Cheers, Mario

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