The Baltic Dry Index, the indicator of global shipping activity is now sitting at 1014, having hit its low of 663 December 5, 2008. This is a valuable measure of global trade activity, and it is indicating a resumption of trade. It is still a long way off its all-time high of 11,793 of last spring, down 91.4% from the top, but up over 50% off its bottom.
We'll keep watching this. This is bullish for both finished exports and commodities. Its still early, and this is a promising sign. The loss experienced in the index includes the value differential owing to the crash in commodity prices experienced during the last 6 months. The BDI Index fell off a cliff in September which coincided with the collapse of Lehman Brothers, which happened to be a large underwriter of trade related financing. With other banks unwilling to take Lehman's place, trade fell into the crater left behind.
Global trade credit froze along with the credit market as it became very difficult, if not impossible to trade, with banks unwilling to issue letters of credit.
This is a sign that the trade finance market is thawing and that shipping can resume. A continuation of this trend should be considered bullish, particularly for China exports, global trade, and for commodities producing companies and countries.
The Baltic Dry Index does not measure the price of oil, although it does include the price of fuel as a component of the shipping cost.
Chart: Bespoke Investment Group
