Baltic Dry Index Down Again

The BDI closed down 35 points at 2447 yesterday, it's 24th straight day of declines. A collapse in Chinese demand for iron ore is what many analysts are saying is behind the rapid demise of the BDI, which was as high as 4074 at the beginning of the month.

Iron ore makes steel, and demand for that has suddenly fallen off a cliff following the Chinese government's decision to cap rapidly rising real estate prices. The global recession has also hit demand for steel from the likes of automotive and appliance manufacturers.

Some pundits are now predicting the BDI to fall to around 2000 by the end of the year, as the global bulk fleet expands as shipping companies take delivery of new vessels that they delayed at the height of the credit crisis.

Cheaper freight levels out the global playing field somewhat, enabling the UK and EU wheat to more easily make inroads into unlikely far-flung destinations. The BDI was below 1000 back in January 2009 when Frontier loaded UK feed wheat in Southampton destined for China.

So a falling freight market might not be entirely bad news for everybody, especially for those with a weak currency like the euro. It should also make imported feed raw materials cheaper too.