Everyone these days seems transfixed on the behaviour of the Baltic Dry Index, perhaps too much so. Does anyone realise how the Baltic Dry index is calculated? In essence there are four dry bulk carrier classes ranging from the super large Capesize class to the smaller Handysize class. There are relatively few capsize vessels compared to handysize vessels. So demand and supply of capsize vessels can vary dramatically relative to that of handysize vessels. Now the Baltic Dry index is made up of the largest of the four shipping classes (capesize, panamax, and supramax), the smallest class (again handysize) is not included. So what is the point of all of this? Well don’t take too much notice of the Baltic Dry Index, it is often misleading due to the erratic demand supply behaviour of capsize vessels. You would be much better off studying the demand and supply characteristics of the Baltic Handysize Index instead.
Now doesn’t the behaviour of the chart below (the ETF SEA) look remarkably like the Baltic Handysize Index! Of course beauty is in the eye of the beholder………..to us simple folk it looks like shipping rates are set to move higher and along with it shipping stocks. Perhaps it does not take a rocket scientist (economist) to work out that commodity prices are also set to lift-off over the coming weeks!
