Baltic Dry Index
The Baltic Dry Index ( BDI) is published by the Baltic Exchange in London and is an important price index for the worldwide shipping of main cargo (mainly coal, iron ore and grain ) on standard routes.
- 7.1 Overview
- 7.2 highs and lows
- 7.3 development of freight
Concept
The Baltic Dry Index ( BDI) is since 1985 from Monday to Friday at 13:00 UTC clock (14:00 clock CET), published by the Baltic Exchange, founded in 1744 in London and determined from the standardized to several market participants. It is divided into the following indices:
- Baltic Capesize Index ( BCI),
- Baltic Panamax Index ( BPI),
- Baltic Supramax Index ( BSI) and
- Baltic Handysize Index ( BHSI ).
Subgroups of index take into account 26 major shipping routes and capture the cost of time charter and voyage charter for four classes of ships ( Capesize, Panamax, Supramax and Handysize ) in dry bulk traffic. Main cargoes are coal, iron ore, cement, copper, gravel, fertilizer, plastic pellets and grain.
The index development influence in addition to the fluctuations of the available ship hold and port capacity as well as seasonal variations, such as harvest cycles and seasons. The index is not traded on the Baltic Exchange. Unlike the markets for stocks and bonds, the BDI is free from speculation. Between the Forward Freight Agreements ( FFAs ) on the BDI and the index itself no arbitrage is possible. FFAs are freight derivatives and can not be traded on the exchange.
Freight rates are determined solely on the data from shipbrokers, ship owners and charterers. In the price, only the real demand and real supply for the transport of raw materials on standard routes are included. In contrast to the economic data, the data of the BDI are not subject to subsequent changes. With the method, as the Baltic Dry Index is determined, manipulations are not possible. Daily updates occur in real time.
The Baltic Dry Index is not published for most UK public holidays. No trading on the Baltic Exchange is held every year on Good Friday, Easter Monday, May Day (first Monday in May), Spring Bank Holiday (last Monday in May) and summer holiday ( last Monday in August). In addition, the Baltic Exchange between Christmas (December 25 ) and New Year's is closed. If New Year's Day falls on a weekend the holiday will be made up on Monday.
Leading indicator for world trade
Obviously there is a relationship of freight rates with commodity prices and demand for metals, fuels, and foodstuffs. Since the Baltic Dry Index ( BDI), the shipping cost of raw materials, the precursor of production determined, it accurately measures the volume of world trade at the initial stage. The BDI is thus a leading indicator for the world economy. However, other indices represent later stages of economic development, when semi-finished or finished products were created from the raw materials.
The greater the number of goods to be shipped, the greater is the demand and the higher the shipping cost. Upward movement of the BDI indicates an increase in global trade, a downward movement of the opposite. The index shows clear cyclical turning points at the beginning and end of each recession and the subsequent recovery. The course of the BDI can clear conclusions on the real development of world trade and the flow of the BDI before the real development is generally from 8 to 12 months.
Changes in the BDI are also an indicator of the performance of the shares of companies in the marine environment. There is a certain parallelism between the development of the BDI and commodity indices.
About 90 percent of world trade, almost 95 percent of the trade of the European Union and nearly 70 percent of Germany's imports and exports are carried by sea. (Also called bulk carrier or bulk carriers ) The BDI detected Bulk own a share of 55 percent of the shipping market. Particularly dry bulk material such as iron ore, coal and cement are needed at the beginning of a production process, so that the BDI is viewed as a leading economic indicator.
Ship classes
The world's largest bulk carrier is built by Daewoo Shipbuilding & Marine Engineering in 2010 Vale Brasil, the Brazilian mining group Vale (formerly CVRD ), with a cargo capacity of approximately 400,000 tons and a length of 362 meters. The following table shows the classes of ships in the Baltic Dry Index, the number of vessels and the percentage distribution of bulk carriers in September 2011.
Main shipping routes
The Baltic Dry Index ( BDI) is divided into four different indices that take into account 26 major shipping routes and capture the cost of time charter and voyage charter for four classes of ships ( Capesize, Panamax, Supramax and Handysize ) in the bulk material transport. The table shows an example of the Baltic Capesize Index ( BCI), which is calculated from the prices of ten capesize routes.
During the aggregation of prices for the different routes to the BCI fixed conversion factors are used, among other things, contribute to the different notation of freight rates (U.S. dollars per ton or dollars per day) statements. The weighting in the BCI is made according to the importance of the routes and adjusted at irregular intervals by the Baltic Exchange.
Capesize cargo can not pass through the Suez Canal or the Panama Canal because of their size. Therefore, you must travel between the oceans around Cape Horn or the Cape of Good Hope. Capesize vessels operate almost exclusively in the transportation of iron ore and coal. They have a ten percent share of the world fleet and 62 percent of the bulk traffic.
¹ ARA = Amsterdam, Rotterdam (Netherlands) and Antwerp (Belgium )
History
Development 1985-2002
The index was published on 4 January 1985 for the first time under the name "Baltic Freight Index " (ERI ) with a base value of 1,000 points. The renamed " Baltic Dry Index" ( BDI) on 1 November 1999. All data is to be noted that this refers to the nominal prices in U.S. dollars of the respective collection period, so are not adjusted for inflation.
On 31 July 1986, the freight index marked with nominal 554 points ( inflation-adjusted 1224 points) an all time low. Since the peak on April 16, 1985 1,064 points ( 2,394 points adjusted for inflation ), the index lost 47.9 percent so. A capacity shortage of bulk carriers (lowest since 1980) allowed the index to 16 May 1989 at 216.1 per cent to 1,751 points ( 3,419 points adjusted for inflation ) rise.
The global recession in 1990/91, triggered by the consolidation of the U.S. government under George HW Bush after the free-spending era under Ronald Reagan, was reflected in a decline in freight rates. On 11 July 1990, the index stood at 1,056 points ( 1,956 points adjusted for inflation ) 39.7 percent lower than on 16 May 1989.
The economic boom of the early 1990s led to an increase in freight rates between 1992 and 1995 to 127.7 percent. 1994 world merchandise exports grew in real terms, ie adjusted for inflation to 9.3 percent. On 1 May 1995, the Baltic Freight Index marked with 2,352 points ( 3,737 points adjusted for inflation ) an all time high, which had 2003 stock until September 12.
The decline in the real growth of world merchandise trade in 1995 to 7.4 percent in 1996 to 5.1 percent dropped the freight rates. On 25 September 1996, the index stood at 992 points ( inflation-adjusted 1531 points) and thus lower by 57.8 percent. Until 24 March 1997, he rose to an interim high of 1,526 points ( 2,302 points adjusted for inflation ).
Several regional economic crises ( the Asian crisis in 1997/98, the Russian crisis in 1998/99, Brazil crisis in 1999 ) left the transport activity back to the oceans. On January 19, 1999, a value of 777 points ( inflation-adjusted 1129 points) was determined for the index. The loss since March 24, 1997 is 49.1 percent. The recovery of the global economy led to the BDI through November 3, 2000 to a level of 1,762 points ( 2,478 points adjusted for inflation ).
During the global recession of 2001, triggered among other things by the end of the boom in the IT and communications industry ( dot-com bubble ), in March 2000, freight rates fell again. On 7 November 2001, the index closed at 843 points ( inflation-adjusted 1153 points) and thus lower by 52.2 percent from a year earlier.
Economic boom in Asia 2002-2008
In the period from autumn 2002 to spring 2008, the Baltic Dry Index rose due to an enormous demand for raw materials in the People's Republic of China and India sharply. On 9 January 2004 the index overcame with 5,046 points for the first time the 5,000 -point mark. Until 6 December 2004, the BDI rose to a high of 6,208 points ( inflation-adjusted 7958 points).
The high demand for raw materials had the amortization period for new ships fall to a low level and led to a boom in the shipbuilding industry. This gave way to the capacity bottleneck of bulk carriers oversupply. The real growth of world merchandise exports fell from 9.7 percent in 2004 to 6.5 percent 2005. As a result, the freight index to August 3, 2005 fell by 71.9 percent to 1,747 points ( inflation-adjusted 2166 points).
The increase in demand for transport services from Asia and the continued economic growth were the BDI again rise sharply. On 10 October 2007 the index overcame with 10,218 points for the first time the limit of 10,000 points. On 20 May 2008, he marked with 11,793 points ( 13,262 points adjusted for inflation ) an all time high. Since August 3, 2005 corresponds to an increase of 575.0 percent.
International 2007 goods were traded with a value of 14 trillion U.S. dollars ( exports of goods ). Or other payment guarantees backed: according to the World Trade Organization ( WTO) 90 percent of these were by letters of credit ( "letters of credit" in English). In the same year new orders were issued for more than 10,000 units ship with a value of 233 billion U.S. dollars worldwide. The order numbers represented a historical record for sea transport.
Economic crisis 2008/2009
2008, had the global financial crisis in the U.S. subprime crisis had its origins in 2007, increasingly on the real economy. The real growth of world trade As a result, decreased 6.5 percent ( 2007), 2.3 percent (2008) and 12.1 percent ( 2009). The financial crisis led to a collapse of trade finance, as the banks themselves barely received payment obligations. Overcapacity due to lack of demand prepared the shipping problems. Numerous orders for new ships had to be postponed or canceled due to funding problems, shipowners put freighter silent or joined an entire operation.
Due to the worldwide economic slowdown, it came mainly from the end of the third quarter of 2008 to strong price declines in freight rates. On 5 December 2008, the Baltic Dry Index ( inflation-adjusted 746 points ) fell with a final score of 663 points in nominal terms to the lowest level since 1986. Since the all-time high of 20 May 2008, this represents a decrease of 94.4 percent. That is the biggest downfall in the history of the BDI. Freight rates for Capesize vessels, the largest class of vessel in the Baltic Dry Index, fell the daily average since the all time high of 233 988 U.S. dollars per day on 5 June 2008 up to 2,316 U.S. dollars per day on 2 December 2008. This corresponds to a decrease of 99.0 percent. The prices were thus temporarily under operating costs.
Recovery in freight rates in 2009
In the course of 2009, freight rates recovered. On 19 November 2009 had to be paid for a Capesize ship an average of 87 118 U.S. dollars per day. The year 2009 ended the Baltic Dry index at 3,005 points. The wedding was on 19 November at 4661 points, the low on January 5 at 772 points. With an increase of 288.2 percent, it was the best year in history. On the 2nd place in 2003 is a gain of 174.2 percent and the 3rd place in 2007 with an increase of 107.9 percent.
The main reason for the increase in freight rates in 2009, demand for iron ore in China, the largest producer of crude steel country. In June 2009, waiting, according to the London shipbroker Simpson Spence & Young 154 cargo ships, or about 18 percent of the global fleet of bulk carriers outside the ports in Australia, Brazil and China, to load or delete resources. At the height of the cargo boom in May 2008, there were 115 ships, the end of November 2008 or 75 boats that had been waiting outside the ports. Responsible for the recovery of the index was also the Chinese stimulus package in the amount of about 600 billion U.S. dollars, which led to strong economic growth.
Overcapacity and natural disasters 2010/2011
The year 2010 closed the Baltic Dry index at 1,773 points. The wedding was on May 26 at 4209 points, the low on July 15 at 1,700 points. With a fall of 41.0 percent the year was the four -worst in history. Worse was only the years 2008 ( -91.5 percent ), 2005 ( -47.7 percent) and 2001 ( -45.2 percent). Cause of the decline in 2010 was a decline in demand for raw materials in China. In particular, the iron ore, the country had sufficiently stocked, now that the moment was no greater need for more. In the real estate market, a major consumer of steel products, measures the Chinese government ensured against the housing bubble for a decline in construction activity.
On 4 February 2011, the Baltic Dry Index fell to 1,043 points. Since the interim high on 10 September 2010 at 2,995 points, the loss is 65.2 percent. Reasons were mainly free charge capacity by the booming shipbuilding, the floods in Australia and bad harvests in many parts of the world. Natural disasters, together with damages, delays, loss of production and price increases part of the world economy. For the first time since December 2008, the freight rates of all four classes of ships ( Capesize, Panamax, Supramax and Handysize ) decreased in the index under the total cost of operation, interest and depreciation. Particularly strong was the slump in Capesize vessels, according to the tankers, the second largest ship class in the world merchant fleet. On 28 February 2011, prices were at 4,567 U.S. dollars per day under the operating costs. Since the High on October 26, 2010 at 46 434 U.S. dollars per day, the loss amounts to 90.2 percent. Because of the low freight numerous shipowners were in financial difficulties. Korea Line Corporation, the second largest South Korean operators of bulk, had to apply for bankruptcy protection on January 27, 2011. The end of September 2010, the shipping company debt in the amount of 1.48 billion euros. The company had 39 owned and 150 chartered vessels one of the world's largest fleets of bulk carriers.
A revival in demand in the transportation of iron ore in the People's Republic of China had the BDI rise on 14 October 2011 at a high of 2,173 points. The profit since February 4, 2011 is 108.3 percent. Completed in 2011, the index at 1,738 points, up by 2.0 per cent lower than a year earlier. The real growth in world trade slowed from 14.1 percent in 2010 to 5.6 percent in 2011.
Historic lows of the BDI 2012
On February 3, 2012, the Baltic Dry Index closed 647 points in nominal terms at its lowest level since 27 August 1986. Loss since its peak on October 14, 2011 is 70.2 percent, since the all-time high on 20 May 2008 at 94.5 percent. Real, ie adjusted for inflation, was marked an all time low. The January 2012 was a decline of 60.9 percent of the second-worst month in history. Worse was only in October 2008 with a decline of 73.5 percent. The slowdown of world trade, the decline in economic activity in the People's Republic of China and the euro crisis led to a decline in sea transport. Numerous newbuilding deliveries and lack of demand increased the excess capacity on the ship market.
A recovery in demand in the smaller classes of ships ( Panamax, Supramax and Handysize ) let the BDI to 8 May 2012, to increase by 80.1 percent to 1,165 points.
On 12 September 2012, the Baltic Dry Index traded lower than 4 months ago at 661 points, up by 43.3 percent. The freight rates of all four classes of ships in the index fell below the total cost of operation, interest and depreciation. The strongest was the slump in the field of large bulk carriers, which are used primarily for mining and transporting coal to China. Since the interim high on December 12, 2011 at 32 889 U.S. dollars per day, the prices of Capesize ships fell to 21 August 2012, at 92.0 per cent to 2,644 U.S. dollars per day. This is the lowest level since December 4, 2008. Bigger was only the fall in 2008 with minus 99.0 percent. The low freight rates led to financial problems for many shipping companies. On August 8, 2012 Founded in 1730 British ocean carriers Stephenson Clarke Shipping was closed. The oldest shipping company in the world, based in Newcastle upon Tyne business for more than 30 bulk carriers in its heyday in the 1990s.
The year 2012 ended the Baltic Dry Index is 59.8 percent lower than at the end of 2011. It was after 2008 ( -91.5 percent), the second-worst year in history. The year-end level of 699 points was the lowest since the introduction of the index in 1985. After 2010 ( -41.0 percent) and 2011 (-2.0 percent) scored the BDI 2012, the third year of losses in a row. The annual average freight rates were nominally at its lowest level since 1986 and in real terms at an all time low.
Ship indices compared
The freight rates for bulk carriers were late 2008/early 2009 with a decline of 94 percent compared with the freight and charter Another important ship classes in long-distance transport (container ships and product and oil tankers ) of the credit crunch (English: " Credit Crunch " ) most affected. The Baltic Dry Index failed in December 2008 with 663 points all-time low from July 1986, which was determined with 554 points, just barely.
The Baltic Dirty Tanker Index ( freight for crude oil) lost 80.7 percent during the financial crisis. The HARPEX ( charter rates for container ships) lost 78.1 percent, the Baltic Clean Tanker Index ( freight rates for oil products ) fell by 77.1 percent and the Howe Robinson Container Index ( charter rates for container ships) fell by 76.6 percent. All indices marked in 2009, each an all time low.
With the recovery of global economy, the Baltic indices rose by the end of 2009/early 2010 strong. HARPEX and HRCI recovering only in mid-2010 from their lows in late 2009. A reason for the different development is the heavy reliance of the Baltic indices of Chinese commodity imports. They each reflect only one aspect of the freight business.
In contrast, the container indices measure the tonnage in a broader market segment, the container transport. Here not bulk goods, crude oil or oil products are recognized, but consumer and industrial products. HARPEX and HRCI are closer to the consumer and not early cyclical, such as the Baltic indices. While the Baltic Dry Index is considered a leading indicator of economic trends, the container indices are indicators of the current state of world trade.
With the weakening of the economic development of the Baltic Dry Index and container indices late 2011/early 2012 fell sharply again. The BDI fell in February 2012 to the level of August 1986. Tanker indices reported lower losses.
The highs and lows of the most important indices for freight and charter rates during the financial crisis from 2007.
¹ gasoline, diesel, fuel oil and kerosene
Freight rates
Overview
Freight rates are the price paid for the carriage of goods by sea. They ensure that supply and demand for freight space remain in equilibrium. The demand, however, changes are often very fast, the offer is very slow. It has the size, age, Route and speed of ships influence on freight rates. In the short term determine speed and use of ships, freight rates. In the long term there are decisions on investments, resulting in orders for scrapping and rebuilding.
The Baltic Dry Index refers in its calculation of the cost of time charter and voyage charter for four ship classes with. In a time charter, the freight rate in U.S. dollars is paid per day. The charterer has the ship at a specified contract period. Fuel and port fees paid by the charterer. In the voyage charter the freight rate in U.S. dollars is paid per tonne. Fuel and port fees paid by the shipowners.
To compensate the strong fluctuations in the market for freight rates and to make manageable, time charter contracts are signed. Through these agreements, the ships will leave for a fixed price to a charterer for a longer period (usually six months to ten years). Only minor changes can be made during the contract period. The benefit to the shipowner and the charterer is a better basis for calculation. The time charter contract thus serves as a hedge against the volatility of freight rates. To make the business more flexible and effective hedge, Forward Freight Agreements ( FFAs ) are used.
The bulk of the Capesize are the largest class of vessel in the Baltic Dry Index. On 5 June 2008, the Baltic Exchange determined with 233 988 U.S. dollars per day, the highest freight rates in the daily average for a Capesize vessel. The lowest freight rates in the daily average were observed on 2 December 2008 with 2,316 U.S. dollars per day.
Highs and lows
The following table shows the highs and lows of rates for the classes of ships Capesize, Panamax, Supramax and Handysize in U.S. dollars per day.
Development of freight
The overview shows the development of freight rates for Capesize ship classes, Panamax, Supramax and Handysize in U.S. dollars per day since 2006.
Running costs
The operating costs include the cost of crew, insurance, consumables, spare parts, maintenance, repair, routine dockings and Class renewals and administration. The average total cost (operating, depreciation and amortization ) for a Capesize vessel amounted to 2008 according to an estimate by JPMorgan Chase & Co. 18,949 U.S. dollars per day. The cost breakdown was as follows: Operating 6,615 U.S. dollars per day, interest 6,091 U.S. dollars per day and amortization 6,243 U.S. dollars per day. The following table shows the costs of operating, depreciation and amortization for the ship classes Capesize, Panamax, Supramax and Handysize in U.S. dollars per day.
The operating costs for bulk carriers increased according to a study by Moore Stephens between 2000 and 2010 by 76 percent. This corresponds to a growth rate of 5.9 percent per year. 2011 had to be paid for the operation of a Capesize cargo 7,437 U.S. dollars per day. Not included here are the costs for interest and depreciation. The following table shows the operating costs for the ship classes Capesize, Panamax, Supramax and Handysize in U.S. dollars per day.
BDI and world trade compared
The average of the Baltic Dry Index from 1985 to 2012 is 2,082 points. The average from 2001 to 2012 were 3,132 points. Subsequently, the annual high, low and closing prices, the annual average and the annual performance of the Baltic Dry Index are listed since 1985. For comparison, the table shows the development of world merchandise exports in the same period. All data of the BDI is important to note that these relate to the nominal prices in U.S. dollars of the respective collection period, so are not adjusted for inflation. Price changes can lead to distortions in the nominal trade statistics for raw materials and the dollar. Therefore, the information on the volume of world trade have in addition to the nominal and real prices in U.S. dollars as a basis.
¹ December 31, 2012