Steve,
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I think what you're saying is exactly what the others are saying, that the index, although treating the price of moving goods, also gives an indication as to how much goods are being transported. Lots of goods on the ships, higher the price, fewer goods, lower price - supply and demand, nothing too complicated.
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Right. But, a small change in shipping demand (10%-20%) can cause a large change in the price of shipping (90%), and BDI reflects the latter. A 90% drop in the BDI does NOT mean a 90% drop in the quantity of goods shipped, which is what some of the articles seem to be implying.
BTW, I don't have a problem with people posting articles of this nature. I'm not taking issue with the poster, just with misrepresentation of what the BDI means in some of the articles. Such as:
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The BDI has dropped 94% in a short few weeks which means raw materials, grains, ores, steel, iron, cement and all imported products for food manufacturing and product manufacturing even though we actually do very little of that here in the US. We do make bread and other products that require grains, like cereals. We import clothing, gasoline, various fuels and, well, just about everything these days and the BDI says global shipping has shut down. NOTHING is moving.
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Shipping is down, but is not "shut down". Goods are moving, but in lower quantities (and at MUCH cheaper shipping rates).
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The Baltic Dry Index (BDI) is an indicator of how much product is actually out for delivery throughout the world.
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No, not really.
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If we can use the Baltic Dry Index (BDI) as a guide for the next 12 months of product delivery and food availability in the stores we shop in then the BDI says shelves will be virtually empty of almost every product we use each and every day.
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The BDI is highly volatile, and is a lousy indicator of what will happen in the next 12 months. What the BDI indicates is that if demand does improve, there is plenty of cheap shipping available to move products.
I expect letter of credit issues will be worked out, but I don't know how long that will take.