MarketsFarm — The Baltic Dry Index (BDI), a major indicator of bulk shipping rates, has climbed sharply higher over the past few weeks to hit its highest level in 18 months.
The BDI settled at 3,346 points on Dec. 4, climbing by roughly 1,500 points in the span of eight sessions to hit its highest level since May 2022 before finally taking a breather on Dec. 5 to settle at 3,143 points.
The BDI is compiled by the London-based Baltic Exchange and provides an assessment of the price of moving major raw materials by sea. The overall BDI includes sub-sectors for the different classes of ocean vessels – including capesize, panamax and supramax. It is often seen as a leading indicator of global economic activity.
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Panamaxes and supramaxes are the primary grain transporting vessels, with panamax spot rates up 53 per cent over the past month to hit US$21,000 per day on Dec. 4, according to a report from Clarkson Securities. Supramax rates were up by 31 per cent over the same timeframe to hit US$16,400.
Restrictions moving through the Panama Canal were behind some of the rise in freight rates, with congestion issues at Brazilian ports compounding the issue, according to industry reports. Winter weather causing unloading delays in Europe and China were another factor, while recent attacks on several vessels in the Red Sea were raising concerns over movement through the Suez Canal.
While bulk rates have trended higher, container rates are holding relatively steady. Drewry’s World Container Index (WCI), which tracks container rates, was at US$1,382 per 40-foot container on Nov. 30, 2023. That was unchanged from the previous week but marks a 40 per cent drop from the same week a year ago.
Canada is at a freight disadvantage compared to its competitors exporting grains and oilseeds into many markets, with lower freight rates helping counter that disadvantage.
— Phil Franz-Warkentin is an associate editor/analyst with MarketsFarm in Winnipeg.
