Dry Bulk Commodity

DEFINITION of 'Dry Bulk Commodity'

A dry bulk commodity is a raw material that is shipped in large, un-packaged amounts. There are many transport companies that specialize in dry bulk delivery. These dry bulk commodities are usually divided into two categories; major bulks and minor bulks. Some examples of major dry bulk commodities include coal, iron ore and grain. These major bulks account for nearly 2/3rds of global dry bulk trade. Minor bulks include steel products, sugars, cement, etc. and cover the remaining 1/3rd of global dry bulk trade.

BREAKING DOWN 'Dry Bulk Commodity'

Dry bulk commodities are mostly unprocessed raw materials that are destined to be used in the global manufacturing and production process. These commodities are generally transported long distances by sea in large cargo vessels. The weight for dry bulk is measured in an industry convention known as tons of deadweight (dwt). Some of the industry's larger transportation vessels can carry mega-tonnes (MT) of deadweight. This industry weight measurement convention developed over time because of the un-packaged nature of the commodities being transported.

The most common indices to measures changes in the cost to transport various dry bulk commodities around the world is the Baltic Dry Index (BDI). The index is derived from contacting various shipping brokers to assess price levels for a given route, product to transport and time to delivery, or speed. A change in the Baltic Dry Index can give investors insight into global supply and demand trends, and is often considered a leading indicator of future economic growth if the index is rising or contraction if the index is falling because the dry bulk goods shipped are raw, pre-production material, which is typically an area with very low levels of speculation.

The transport of dry bulk commodities is highly regulated, due to the effects that an in-transport accident can have on the environment. Since these commodities are un-packaged, a spill puts them right into the environment and renders them extremely difficult to clean up leading to destruction of the environment and possible endangerment of people and wildlife.

According to OpenSea.Pro, coal is the dry bulk commodity with the second largest trading volume in the world after iron ore. Countries most involved in the importation of coal for their primary energy and electricity needs are India, China and Japan. Grain is the third major cargo in terms of seaborne dry bulk trade and accounts for about 9.50% of the total dry bulk trade worldwide at 430 million tons per year.