The Baltic Dry Index (BDI) is considered a measure of the health of the global economy since it tracks the rate shippers pay to charter vessels to haul raw materials from their origination point to where they will be turned into products. Lately, this index has been diving, falling by about 40% and bringing rates down to their lows of October 2009. An article discussing this trend pointed out that the index’s decline was driven less by a fall in cargoes and more by a surge in new vessel construction. To support this contention, the writer pointed to the capsize ships, the largest oceanic vessels and one of the workhorse class of cargo ships in the fleet. Between 1980 and 2008, the industry took deliveries at a pace of about one new capsize vessel every two or three weeks. This moderate growth essentially maintained the fleet’s supply/demand balance and turned the BDI into a relatively good measure of economic activity for shippers and investors.

Musings from the Oil patch is provided by Parks Paton Hoepfl & Prown an independent investment banking firm focused exclusively on the energy service industry. www.pphb.com