What Baltic Dry Index Says About Economy and ETFs | ETF Trends

While there are exchange traded funds (ETFs) that represent the shipping sector, none track the Baltic Dry Index. But that doesn’t mean one should ignore this index – it can tell us a lot of things about the global economy and the shipping sector.

David Walker at the Charleston Voice explains the inner workings of the index. There are five types of ships transporting goods around the world:

  • Container ships, which carry finished products
  • Bulkers carry dry cargo such as iron ore and grains, finished steel, coal, etc.
  • Tankers carry liquid bulk, oil, chemicals, molasses and so on
  • Ro Ro carries “roll on, roll off” goods, such as cars
  • Reefers ship bananas, oranges and similar items

The BDI covers the second type of ship, bulkers.

In short, demand for raw goods is way down and this speaks loudly of future industrial activity. As you will note in housing starts, it was the a leading indicator of what was to come. The crash in the BDI does not speak well for our future economic prospects, like housing starts indicated a problem was upon us, so to does the drop in the freight rates. An additional fact that should not be overlooked is that the price of bunker fuel is way down, so this would impact freight rates in addition to demand for vessels, Walker says.

Ship bookings in the busy ports of Los Angeles and Long Beach are down 30% for the first half of 2009 compared to 2008. It’s not pretty out there right now.

  • Claymore/Delta Global Shipping Index (SEA): down 52.4% since Sept. 8 inception

Shipping ETF

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.