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Baltic Dry Index: what is and importance of its function

by Thomas
Baltic Dry Index

When you trade on financial markets or just want to understand how the economy is going in the world, you can not forget Baltic Dry Index, what is and importance of its function.

Baltic Dry Index records rental price data for the 24 busiest shipping routes in the world, is a “thermometer” that identifies the shipping costs of raw materials and ratio of demand to supply. Baltic Dry Index consists of 3 underlyings that calculate the different sizes of merchant carriers or ships such as the cargo capacity in tons (Capesive,Panamax and Supramax).

Experts who then calculate Baltic Dry Index make an in-depth analysis of the geographical paths of each underlay, while contacting shippers around the world to collect prices, taking a picture of the situation.

Baltic Dry Index is a bit like Purchase Managers’ Index (PMI) because it tells us the health of world economy, providing data on the demand of manufacturing companies, so if there is demand it means that the economy is well. On the contrary, it shows us a contraction, so traders constantly monitoring this index managing their long or short position.

Baltic Dry Index represents the global supply and demand trend on the chart, it is not very influenced by data such as inflation and unemployment so I recommend using it as a macroeconomic and operational reference.

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