Baltic Dry Index Falls Sharply

The News:

Baltic Dry Index slumps 35% from year's high

The Baltic Dry Index (BDI), a measure of shipping costs for dry bulk commodities, slumped around 35% on August 14 from this year's high of 4291 on June 3. This is the sharpest fall registered by the index since June 3. The BDI went below 3000 to close at 2685 on Friday, after being through a troublesome week.

According to experts, one reason leading to such drop in BDI is the slowdown of Chinese demand for shipments of coal and iron ore. Moreover, as delivery of new ships has started to happen, it is impacting the freight rates.

"Slowdown in Chinese demand is a concern. Moreover, the delivery of new ships has started, due to which freight rates are going down impacting the BDI. The new ships are leading to a gap between demand and supply, as the demand situation is yet to gain pace," commented S Kulkarni, secretary, Indian National Ship owners' Association.

China's coal and iron ore imports in the first half helped the index to advance as much as five fold this year, reversing some of the record 92% collapse in October 2008. So far this year, China has imported nearly 355 million tonnes of iron ore, compared with 440 million tonnes for the whole of 2008. Hence, the worry for the shipping industry is that Chinese buying will slow further as its mills struggle to work through that enormous inventory.

My Views:

While Central Banks around the world have been pushing hard to create another bubble with their loose monetary policies but its The Chinese who have become successful! They are competing directly with the US on who is bigger fool and seem to have won the bet for now...