Blog
Unit 4 Macro: Baltic Dry Index and Global Weakening
19th August 2011
A few years ago the sky-high level of the Baltic Dry Index was widely quoted as a sign of the surge in global trade and the rising cost of shipping products across the world. The index is back in the news today but for more pessimistic reasons; a steep decline in the index is being taken as a harbinger of weaker demand and activity in the world economy.
The Baltic Dry Index is a shipping and trade index created by the London-based Baltic Exchange that measures changes in the cost to transport raw materials such as metals and grainby sea. The Baltic Exchange directly contacts shipping brokers to assess price levels for a given route, product to transport and time to delivery (speed).
The fall in the Dry Index also reflects a huge rise in shipping capacity - the world supply of ships of all sizes has consistently outstripped demand - and this excess supply has driven down freight shipping rates.
In this BBC news video Economic slump hits global shipping trade we see how excess supply capacity is affecting the world freight industry
Geoff Riley
Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.