Baltic Dry Index

The Baltic Dry Index (BDI) is an economic indicator issued daily by the London-based Baltic Exchange. Not restricted to Baltic Sea countries, the index provides "an assessment" of the price of moving the major raw materials by sea. Taking in 23 shipping routes measured on a timecharter basis, the index covers Handysize, Supramax, Panamax, and Capesize dry bulk carriers carrying a range of commodities including coal, iron ore and grain."

In 1744, the Virginia and Maryland coffee house in Threadneedle Street, London, changed its name to Virginia and Baltick, to more accurately describe the business interests of the merchants who gathered there. Today's Baltic Exchange has its roots in a committee of merchants formed in 1823 to regulate trading and formalize the exchange of securities on the premises, which by then had moved to the Antwerp Tavern. The first daily freight index was published by the Baltic Exchange in January 1985.

Every working day, a panel of international shipbrokers submits their view of current freight cost on various routes to the Baltic Exchange. The routes are meant to be representative, i.e. large enough in volume to matter for the overall market.

These rate assessments are then weighted together to create both the overall BDI and the size specific Supramax, Panamax, and Capesize indices. The BDI factors in the four different sizes of oceangoing dry bulk transport vessels:

The BDI contains route assessments based only on time-charter hire rates "USD hire paid per day". Fuel (="Bunkers") is the largest voyage dependent cost and moves with the crude oil price. In periods where bunker costs fluctuate significantly, the BDI will move more than the shipowners' realised earnings(?). The formula implemented for calculating the Baltic Dry Index includes ((CapesizeTCavg + PanamaxTCavg+ SupramaxTCavg + HandysizeTCavg)/ 4) * 0.110345333 TCavg = Time charter average.

The index can be accessed on a subscription basis directly from the Baltic Exchange as well as from major financial information and news services such as Thomson Reuters, Bloomberg L.P., Macrobond Financial and Factset.

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