CNS Canada — The Baltic Dry Index has posted sharp gains over the past month, rising to its highest levels in nearly two years.
The BDI settled at 1,257 points on Friday, having gained roughly 400 points over the past two weeks. The index was last this high in November 2014, and has shown steady gains since hitting a record low of 290 points in February 2016.
The BDI is compiled daily by the London-based Baltic Exchange and provides an assessment of the price of moving major raw materials by sea, including grain.
An overcapacity of ships, the slowdown in Chinese demand for building materials, weakness in crude oil, and declining commodity prices all contributed to the lower freight rates over the past year, according to freight analysts.
However, those rates were deemed too low to be sustainable, while demand for bulk commodities has also improved.
In addition, the lower rates earlier have led to an increase in older ships being scrapped; helping ease the overcapacity situation, according to analysts.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.