What is a 'Dry Bulk Commodity'

A dry bulk commodity is a raw material that is shipped in large, unpackaged parcels. 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 two-thirds of global dry bulk trade. Minor bulks include steel products, sugars, cement, etc. and cover the remaining one-third 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 megatonnes (MT) of deadweight. This industry weight measurement convention developed over time because of the unpackaged 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. A change in BDI is also considered a leading indicator of either future economic growth if the index is rising or contraction if the index is falling, as 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 unpackaged, 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 ship chartering firm 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.
 

RELATED TERMS
  1. Dry Loan

    A dry loan is a mortgage where the funds are supplied after all ...
  2. Baltic Dry Index - BDI

    The Baltic Dry Index is a shipping index created by the Baltic ...
  3. HARPEX Shipping Index

    The HARPEX Shipping Index tracks weekly container shipping rate ...
  4. Baltic Exchange

    The Baltic Exchange handles the trading and settlement of both ...
  5. Commodity Price Risk

    Commodity price risk is price uncertainty that adversely impacts ...
  6. Commodity

    A commodity is a basic good used in commerce that is interchangeable ...
Related Articles
  1. Insights

    Bulk Shipping Companies Struggle As Markets Soften

    The "soft" dry bulk shipping market that confronts shipping companies is a result of lower demand from China, and an excessive amount of bulk ships.
  2. Personal Finance

    The Dark Side of Bulk Buying

    Find out why getting more for less isn't always a great deal.
  3. Insurance

    4 Secrets You Should Know When Buying Groceries

    With a little foresight, every consumer can find ways to eat healthier without spending much money.
  4. Investing

    Chinese Slowdown Affects Iron Ore Market

    The Chinese economy's ongoing slowdown is having a major impact on iron ore demand.
  5. Tech

    Best Stocks to Buy for Less Than $5 (FCEL, MEET)

    Learn more about interesting small-cap stocks, selling for less than $5 per share, that investors may wish to consider adding to their portfolio.
  6. Financial Advisor

    When Will it Be Safe to Buy Commodities?

    When will it be safe to buy commodities (and which ones)? A closer look at the commodities markets and how they move.
  7. Trading

    Olive Garden Parent Back on the Acquisition Trail

    Olive Garden parent Darden is finally shaking off the 2014 Red Lobster divestiture and looking to grow earnings through key acquisitions. (DRI)
  8. 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.
  9. Investing

    Commodity Funds 101

    These funds make investing in gold, oil or grain an easier prospect.
  10. Investing

    Iron Ore Market: Falling Into The Hands Of A Few

    The big iron ore mining companies have embarked on a drive to increase supply, reduce cost, and take market share.
RELATED FAQS
  1. What raw materials do auto manufacturers use?

    Learn about some of the raw materials required for auto manufacturing, including iron for steel, aluminum, rubber, and petroleum ... Read Answer >>
  2. Do all taxes create deadweight loss?

    Learn how taxes create deadweight loss in society. Learn how this loss can be reduced, depending on certain characteristics ... Read Answer >>
  3. What are the most popular mutual funds that invest in the automotive sector?

    Discover some of the mutual funds investors use to profit from gains in the automotive industry portion of the transportation ... Read Answer >>
  4. Can mutual funds invest in options and futures? (RYMBX, GATEX)

    Learn how mutual funds invest in stock options and futures to benefit from commodities price swings and hedge their portfolio ... Read Answer >>
  5. What is the difference between Cost and Freight (CFR) and Free on Board (FOB)?

    Learn some international Incoterms, and find out about the difference between free on board shipping and cost and freight ... Read Answer >>
Trading Center