“Late February, and the air’s so balmy snowdrops and crocuses might be fooled into early blooming. Then, the inevitable blizzard will come, blighting our harbingers of spring…”
Gail Mazur, The Idea of Florida During a Winter Thaw
Bloom or Dust.
Just a little over a year ago, February 10th 2016 to be exact; the BDI (Baltic Dry Index) fell to 290 points, a historic low for the index, which measures dry cargo shipping activity. Now, the BDI is emerging from the gloom and as of this writing [March 2nd 2017] has cracked the 900 level, putting the index up over 164% for a 52-week period. Although this rise in the BDI is a significant indicator of an improvement in trading conditions, it is worth remembering that back in 2008 the index peaked at 11,793, just before the collapse with the onslaught of the Great Recession. During the following two-and-half weeks, the BDI shed nearly 94% of its value and never fully recovered. The moral of the story: what goes up often comes down a lot quicker.
Using the 2008 BDI peak might be an unfair point of comparison – after all from the inception of the “new” Baltic index system in 1985, until the first real spikes in 2003, the BDI generally bounced between 1500-to-2000. However, since 2002 until 2012, the BDI has been in a bloom and mostly dust cycle, - few very profitable springs followed by the entire market biting the dust. (see charts on page 6 and 15)
From a technical stand point, the BDI is an evaluation of the price (or costs) to ship raw material – essentially commodities – around fifty well established shipping routes by ship size…
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