Baltic Dry Index - BDI

AAA

DEFINITION of 'Baltic Dry Index - BDI'

A shipping and trade index created by the London-based Baltic Exchange that measures changes in the cost to transport raw materials such as metals, grains and fossil fuels by sea. The Baltic Exchange directly contacts shipping brokers to assess price levels for a given route, product to transport and time to delivery (speed).

The Baltic Dry Index is a composite of three sub-indexes that measure different sizes of dry bulk carriers (merchant ships) - Capesize, Supramax and Panamax. Multiple geographic routes are evaluated for each index to give depth to the index's composite measurement.

It is also known as the "Dry Bulk Index".

INVESTOPEDIA EXPLAINS 'Baltic Dry Index - BDI'

Changes in the Baltic Dry Index can give investors insight into global supply and demand trends. This change is often considered a leading indicator of future economic growth (if the index is rising) or contraction (index is falling) because the goods shipped are raw, pre-production material, which is typically an area with very low levels of speculation.

Because the supply of large carriers tends to remain very tight, with long lead times and high production costs, the index can experience high levels of volatility if global demand increases or drops off suddenly. The Baltic Exchange also operates as a maker of markets in freight derivatives, a type of forward contract known as FFAs (forward freight agreements) that are traded over-the-counter.

RELATED TERMS
  1. Business Cycle

    The fluctuations in economic activity that an economy experiences ...
  2. Baltic Tiger

    A colloquial term that refers to any one of the three Baltic ...
  3. Address Commission

    The fee paid by vessel owners to charterers, the party who owns ...
  4. Baltic Exchange

    An exchange that handles the trading and settlement of both physical ...
  5. Intermodal Freight

    Products and raw materials that are placed in a container that ...
  6. Lagging Indicator

    1. A measurable economic factor that changes after the economy ...
RELATED FAQS
  1. What is the difference between consumer surplus and economic surplus?

    The consumer surplus is the difference between the highest price a consumer is willing to pay and the actual market price ... Read Full Answer >>
  2. What does it signify about a given product if the consumer surplus figure for that ...

    High consumer surplus for a particular product signifies a high level of utility for consumers and may carry some implications ... Read Full Answer >>
  3. What are common reasons for governments to implement tariffs?

    A tariff is a tax imposed by a governing authority on goods or services entering or leaving the country and is typically ... Read Full Answer >>
  4. How does mercantilism impede global economic growth?

    Mercantilism impedes global economic growth by leading producers to specialize in goods and services that do not take account ... Read Full Answer >>
  5. How do "factor endowments" impact a country's comparative advantage?

    Factor endowments impact a country's comparative advantage by affecting the opportunity cost of specializing in producing ... Read Full Answer >>
  6. What does 'Incoterms' mean in relation to Ex Works (EXW) trades?

    Ex works is part of the published Incoterms and outlines the obligations of transportation to buyers and sellers. The International ... Read Full Answer >>
Related Articles
  1. Economics

    The Baltic Dry Index: Evaluating An Economic Recovery

    This index can provide insight into economic growth and production, but it has its critics.
  2. Mutual Funds & ETFs

    Benchmark Your Returns With Indexes

    If your portfolio is always falling short, you may not be making an apples-to-apples comparison.
  3. Markets

    A Guide To Conference Board Indicators

    Learn to put the CB data sets to trading use. Each chapter takes you through one of the board's benchmark indicators or surveys, their significance and their applications.
  4. Retirement

    Economic Indicators To Know

    The economy has a large impact on the market. Learn how to interpret the most important reports.
  5. Economics

    What is a Capital Account?

    Capital account is an economic term that refers to the net change in investment and asset ownership for a nation.
  6. Economics

    Understanding the Fisher Effect

    The Fisher effect states that the real interest rate equals the nominal interest rate minus the expected inflation rate.
  7. Investing

    The Labor Market Recovery’s Missing Ingredient

    Job creation is running at the fastest pace since the 90s, and there is some evidence that wage growth is finally starting to accelerate, albeit modestly.
  8. Economics

    Gambling on Macau: Too Risky?

    Macau was once heralded as the new Las Vegas for casino investors. Is it too late?
  9. Economics

    When To Expect Fed Liftoff Now

    “When will the Fed raise interest rates?” That has been the question of many investors since the Fed indicated it was prepared to end its zero rate policy.
  10. Economics

    Can The U.S Close Its Trade Deficit?

    The stronger dollar could have increased the U.S. trade deficit. Instead, economic growth issues abroad and falling oil prices have helped shrink it.

You May Also Like

Hot Definitions
  1. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  2. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  3. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  4. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  5. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
  6. Tangible Net Worth

    A measure of the physical worth of a company, which does not include any value derived from intangible assets such as copyrights, ...
Trading Center