Baltic Dry Index: Have We Seen the Highs?

It sounds like a fair dilemma at this cycle of the shipping market with the Baltic Dry Index having advanced considerably since the middle of 2020. And perhaps this question could be answered from both a fundamental and technical perspective.

–By simply looking at the historic 5-year graph of the Baltic Dry Index we can easily infer that reaching much higher levels than the current ones is not going to be an easy task. This year’s high of 2,281.00 pts (March 19, 2021) can be “compared” with the entire period’s high of 2,462.0 pts (September 6, 2019) which is roughly 180 pts away. Furthermore given the high volatility of, especially, the past couple of years, even if it was for the Index to surpass this 5-year high, most likely such a move would not be sustainable in view of this historic track record which is a convincing combination of strong resistance and high volatility.

From a fundamental point of view, and very simply again, we can say that we have already seen so many things over the past months concurrently taking place: a significant gap between demand and supply, strong recovery in commodity prices or at least in specific sub-markets, strongly rebounding oil prices and a lot of optimism over a decisive win against the pandemic of Covid-19. So one may say what else can be discounted and become a booster for the Dry Bulk Index going forward? Not so many factors could be the answer.

FIGURE 1: Baltic Dry Index (BDI) – 1 Month up to March 31st, 2021

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

Source: Bloomberg, Trading Economics

FIGURE 2: Baltic Dry Index (BDI) – 1 Year up to March 31st, 2021

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

Source: Bloomberg, Trading Economics

FIGURE 3: Baltic Dry Index (BDI) – 5 Years up to March 31st, 2021

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

Source: Bloomberg, Trading Economics

So in conclusion, the Baltic Dry Index may have already seen its highs since from both a fundamental and technical perspective the market appears in close proximity with the historic highs and maximum optimism observed over the past 5-year period.