The Ups and Downs of the Baltic Dry Index

June 22, 2016 5:06 PM

Though obfuscated by rapid increases in China's shipping fleet, it has reliably predicted economic downturns. [SL New Yorker] It reflects the rates that freight carriers charge to haul raw materials, and has emerged as an unlikely barometer of economic health.
posted by Bee'sWing (2 comments total)

Shipping tends to be incredibly cyclical. When rates are high everybody orders new ships (which typically take 2-3 years to build). Once all of these new ships arrive, rates nosedive due to the oversupply. Then nobody is building ships because the rates are awful and after a few years the rates go crazy because there are not enough ships.

Big simplification, but that's how it's basically been.

I think to make a prediction of an economic downturn due to an overcapacity of ships is not necessarily correct. It's an oversupply but not necessarily a lack of demand, even if that may also be the case.
posted by dabug at 5:55 PM on June 22, 2016 [7 favorites]

previously! ("Why are ocean freight rates so low?" ;)
posted by kliuless at 1:30 AM on June 24, 2016 [1 favorite]