The Freight Market

The Baltic Dry Index fell to close at 2482 yesterday, the 23rd straight day of declines, and marking a drop of more than 40% since late May.

Analysts estimate that 90 percent of the world's traded goods by volume are transported by sea, which is why the BDI is normally regarded as a good barometer for the overall health of the global economy.

One of the reasons behind the fall is the Chinese government's recent moves to curb property speculation, which has dampened their demand for steel. That's a disappointment for those hoping that China’s growth is going to get the world out of the economic mess it is trying to extricate itself from.

Of course the BDI is also heavily influenced by the volume of Chinese exports, not just imports. Their government's recent decision to allow the yuan to appreciate, could harm those export prospects, especially to places like Europe with the acute euro weakness we are currently witnessing.

Reports suggest that there are also lots of shiny new ships set to enter the freight market in the second half of 2010 and 2011, which could see the BDI decline further.

The last time the BDI was this low was around September/October 2009, when it briefly fell below 2200 points. CBOT soybeans, corn and wheat all posted seasonal lows around the same time.