Long story short: The Baltic Dry shows how much people are willing to pay to ship certain raw materials. You can track it at Bloomberg or by going to the exchange's own Web site.
It can be enormously jumpy. The supply of shipping vessels is very, very inelastic--it takes at least two years and tons of bucks to build a ship--so even the tiniest shifts in the demand curve will generate great changes in prices. And there lots of possibilities for demand disturbances--like swings in commodity prices, changes in the weather and variations in the price of bunker fuel which can move operating costs.
OK, so what's happening now? No surprises here. The Baltic Dry Index had a strong run-up between 2005 to the end of 2007. This year, it reached a high of $11,793 in May, but it's been pretty much tanking ever since. It's now under $900--having lost over 90% of its value.
The stories about stagnation in global trade had been circulating quietly for a while: exporters having trouble finding financing to ship their goods from emerging markets; bankers refusing to recognize the letters of credit that exporters have traditionally used; ships having to slash their freight rates to attract business.
The whispers crescendoed to a dull roar last week. A Thai shipping executive told a Singapore audience that credit was frozen. Moody's Economy.com and a report from Maersk Broker said goods were piling up at ports, pending financing.
Richard Kelly, senior economist at Toronto-Dominion Bank, keeps hearing stories about raw materials sitting on ships in Asian ports.
Global trade, he fears, is stalling - not because demand, which has slowed but still exists, isn't there, but because a lack of confidence among creditors is preventing the goods from moving.
I'm not so sure, myself, as the last time I talked to puffydrake, he said things weren't as bad as the reports might suggest. But another chat with him is long overdue anyway.