The Baltic Dry Index (BDI) has been called “an efficient economic indicator of future economic growth and production.” That might be a bit of a stretch but it is a useful piece of information. Wikipedia has a page with futher information about its origins and what it is based on, suffice to say that it is a measure of shipping prices of various dry bulk cargoes. For balance an alternative assessment of the BDI can be found here. The point is not to use the BDI as a trading strategy but as another important piece of the jigsaw to be used when trying to determine how the global economy is travelling.
Out of interest below is a plot of the BDI versus copper prices this decade, as of the end of August 2009. Similar plots can be made for most/many commodities. It is noteworthy that earlier this year when China began (supposedly?) stockpiling copper (and some other minerals/metals), copper stockpiles declined while the BDI rose. Chinese stockpiling presumably ended a few months ago because we’ve seen a rise in LME stockpiles indicating a drop in demand. The BDI began dropping at about the same time. Nevertheless despite the signs of decreasing demand copper, and other base metal, prices kept marching upward.
This sort of relationship shouldn’t come as a revelation. Unless we’re experiencing a speculative mania then you would expect rising metal prices to indicate rising demand (relative to supply). Those metals, demanded by manufacturers etc. have to be shipped.
Baltic Dry Index vs spot copper prices
Baltic Dry data can be obtained here.
