The Baltic Dry Index, the Baltic Exchange’s key sea freight index, has suffered its largest fall in the past seventeen years.
Tracking the rates for supramax, panamax and capsize vessels carrying dry bulk commodities across the world, the index dropped by 18 points, or 2.3 per cent, to 773, according to Refinitiv data.
Although this marks the 20th consecutive session of continuous decline, the longest such streak since November 2015, the severity of the plunge indicates an end to the so-called ‘front-loading’ effect of tariff deadlines.
As the US-China trade war rumbled on for more than 18 months depressing global growth, firms rushed to import goods before the latest tariff deadlines.
Baltic Dry now stands at its lowest level in eight months. The capsize index, which tracks ships that mainly transport iron ore and coal, fell 5.8 per cent to 1,197. The panama index, which tracks vessels carrying coal but also grain cargoes fell to its lowest level since February, falling 5 per cent to 803 points.
While the larger supramax index still stands well above its 12-month low of early February, it is still down from its 12-month peak of early September.
Some have hailed an end to front-loading, triggered by the agreement between the US and China on an initial ‘phase-one’ trade deal, as an indication that the pressure of the past 18 months is alleviating.
However, the steepness and continuity of the Baltic Dry Index’s decline also indicates that the global economy is decelerating, notwithstanding the recent trade war.
With fears for shipping in 2020 now affected by the increase in tensions in the Middle East, the index will continue to be a valuable indicator for the state of the global economy.
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