Shipping Index at Three-Year Low

The Baltic Dry Index has fallen to a three-year low of 807, a long way from its five year high around 12,000 in May of 2008. It’s high point last year was around 2,150. Whether or not one believes that the Index is a leading indicator of the state of the global economy, there can be little argument that dry cargoes like iron ore are not moving around as much as they did in 2008.

Part of the problem is the length of time that it takes to build new vessels. At the peak of the shipping market, ship owners ordered new ships and those vessels have now flooded the market as they enter service. Older ships are being scrapped, but not at a fast enough pace to absorb the new vessels. And scrap prices are not as high as previously because steel demand is down.

Shipping capacity is expected to grow by 10% this year, while iron ore shipments are looking at a projected increase of about 2.5%. The Baltic Dry Index is likely to remain depressed for some time, but what that now says about the global economy is a matter of debate.