Baltic Dry Freight Index Plummets Amid Commodities Slump

By COSTAS PARIS Feb. 5, 2015 6:59 a.m. ET LONDON—The Baltic Dry Index, which tracks freight rates for ships carrying raw materials, has slumped to its lowest point in 29 years, hit by a shipping glut, falling commodity prices and declining import demand from China. This week, the BDI fell to 577, its lowest level since July 1986, and a far cry from its peak of 11,793 in 2008. The world’s fleet of dry-bulk ships far exceeds demand for the vessels that carry commodities such as iron ore and coal, with capacity estimated around 20% above demand over the past few years. Many ships ordered at a time of booming global trade before the 2008 financial crisis have come into service as economic growth has sputtered in the years since. Add to this falling oil prices, which suppress freight rates, and less-rapid economic growth in China which is the world’s biggest commodities importer, “and you get the perfect storm for dry-bulk shipping, which will take a while to come out from,” said Aris Vlachopoulos, a senior freight consultant advising Singaporean and Greek shipping companies. Rui Guo, a freight analyst at London-based ICAP Shipping, said the tonnage in the water of … continue reading

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