What is the '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".

BREAKING DOWN '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. Baltic Exchange

    An exchange that handles the trading and settlement of both physical ...
  2. Baltic Tiger

    A colloquial term that refers to any one of the three Baltic ...
  3. HARPEX Shipping Index

    The container ship index of ship brokers Harper Petersen & Co. ...
  4. Private Carrier

    A company that owns the vehicles used to transport its own goods. ...
  5. Dry Bulk Commodity

    A commodity which is shipped in large, unpackaged amounts. There ...
  6. Freight Derivatives

    A financial instrument's value that is derived on the future ...
Related Articles
  1. Insights

    The Baltic Dry Index: Evaluating An Economic Recovery

    This index can provide insight into economic growth and production, but it has its critics.
  2. Insights

    Singapore Exchange in talks to buy Baltic Exchange (SGX)

    Singapore Exchange confirms it has entered into exclusive takeover talks with London's Baltic Exchange.
  3. Investing

    Bulk Carrier Vs. Container Vs. Tanker: Exploring the 2016 Shipping Market (C)

    Read about the divergent fates of oil tankers, dry bulk carriers, container ships and other seafaring vessels in the 2016 shipping market.
  4. Investing

    Is it the Right Time to Raise Interest Rates?

    Warning signs have started to emerge that point to a potentially dismal 2016 for the U.S. economy.
  5. Investing

    Major Companies That Lose Money On Shipping (AMZN)

    We look at some of the big companies in the home delivery business that have high shipping costs and how they mitigate this.
  6. Trading

    Channel Dow Jones To Tackle Transport Stocks

    Trade the Dow Jones Transportation Average directly through a traditional fund or break components into baskets of sub-sectors.
  7. Investing

    Top Three Transportation ETFs (IYT, XTN)

    These three transportation funds attract the majority of sector volume.
  8. Financial Advisor

    DJIA vs. Dow Transport: A Telling Divergence?

    The Dow Transport Index and the Dow Jones Industrial Average are sending mixed signals. What does it mean?
  9. Investing

    What is an Index?

    An index is a statistical means of calculating a change in an economy or market.
  10. Investing

    How Does a Company Use Raw Materials?

    Raw materials are the basic components of a finished product.
RELATED FAQS
  1. What kinds of costs are included in Free on Board (FOB) shipping?

    Find out about free on board shipping, the obligations of parties involved and the costs parties must assume in free on board ... Read Answer >>
  2. What is the difference between cost and freight (CFR) and cost, insurance and freight ...

    Find out about the difference between cost and freight and cost, insurance and freight, two commonly used international trade ... Read Answer >>
  3. What is the difference between Cost and Freight (CFR) and Free on Board (FOB)?

    Learn about some international Incoterms, and find out about the difference between free on board shipping and cost and freight ... Read Answer >>
  4. On which financial statement does a company list its raw material costs?

    Discover what items are raw materials, how raw material costs affect businesses, and where these costs are recorded on a ... Read Answer >>
  5. Is it possible to invest in an index?

    First, let's review the definition of an index. An index is essentially an imaginary portfolio of securities representing ... Read Answer >>
  6. What are the legal regulations on delivery duty paid?

    Understand the legal requirements for delivery duty paid, as well as how responsibilities can shift between buyers and sellers ... Read Answer >>
Hot Definitions
  1. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  2. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  3. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  4. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  5. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  6. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
Trading Center