Baltic Dry Index Has Nowhere Else to Go

The Baltic Dry Index (BDI) continued with unabated pace over the past couple of weeks as it reached new highs while it was lately trading at around 5,380 points (October 13, 2021). The above level was much higher than the 4,962 points at the end of September 2021 and the 4,220 points in the middle of the same month.

Concerning the previous period, the Baltic Dry Index traded at around 3,650 points in middle of August 2021 versus 3,281 points on August 4th, 3,058 points on July 21st, 3,179 pts on July 5th, 2021, but also 2,420 pts during May 2021.

It is clear that the trend is getting steeper and steeper, and the Index seems to be holding strong with the message being that it has nowhere else to go.

In this week’s blog, we would like add a couple of observations, probably already known, as continuation to our previous comments:

— Current high levels of the Baltic Dry Index resemble the ones of the years 2008 – 2010 in broader terms where volatility was at its highs and the steep uptrend was followed by a steep downtrend; Other than that, the waters where we navigate today are unchartered by all means.

— As comparisons are made intuitively against that period in the past, we can observe that asset prices are currently lower than the ones prevailing back in 2009. Does this mean there is more room for asset prices to go up? Or it simply is the case because those prices in the past had been part of the overall exuberance of the time and had no reflection in fundamentals?

In conclusion, the market continues to demonstrate unprecedented strength but we will continue to support the view that at these so high and steep levels, volatility is lurking and participants should be aware of the risks that lie ahead.

Source: Bloomberg

FIGURE 1: Baltic Dry Index (BDI) – July – October 12, 2021     

[Bloomberg ticker: BDIY:IND, BDI Baltic Exchange Dry Index]

Source: Bloomberg, Trading Economics, https://www.marinevesseltraffic.com/ , www.investing.com

FIGURE 2: Baltic Dry Index (BDI) – 2010 – October 12, 2021    

[Bloomberg ticker: BDIY:IND, BDI Baltic Exchange Dry Index]

Source: Bloomberg, Trading Economics, https://www.marinevesseltraffic.com/ , www.investing.com

FIGURE 3: Baltic Dry Index (BDI) – Last 36 Years up to September 2021    

[Bloomberg ticker: BDIY:IND, BDI Baltic Exchange Dry Index]

Source: Bloomberg, Trading Economics, https://www.marinevesseltraffic.com/ , www.investing.com