Baltic Dry Index – Moving…

April 13, 2009 10:00 am

The Baltic Dry Index, an index that follows the cost for cargo and goods traveling by sea. During its heyday, it was approaching 12,000 and now it is almost 90% lower. This is usually a good guide to how much demand there is for the global economy and works rather well as a coincident indicator.

Notice how it turned down recently in a time when some stocks that usually track it are moving up. (Excel Maritime (EXM) to be exact). But one of the interesting points here is that the index started to move higher during the first part of 2009, stoking the idea that global demand is revving higher.

At the same time, we are finding the there are hundreds of ship contracts being canceled around the world and empty ships are  filling up the harbors in and around Asian countries. This is clearly a sign of overcapacity and well backed up by the decline in vessel costs beginning March 1,2009.

Looking at the longer moving averages shows a continuation of a slide and only the 50 day average is moving higher. We would like to see the average turn higher and the index tick above the January highs in order to see this as a recovery trend that has good investment qualities. In other words, this recent move by EXM seems to be out of sync with the index. Cost cutting? Something else?

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(Click on chart to enlarge)

Below are a few of the shipping stocks that usually follow the Baltic Dry Index. DRYS has been following the index rather well, but as mentioned, EXM is breaking out on a good earnings announcement.

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