FFA & BDI

UNCTAD made some widely noticed remarks (Transport Newsletter No.42) about how BDI may now longer be such a good indicator for changes on the demand side for commodities. It is no longer the mirror it once was for industrial production. One reason for this disconnection is that there are big waves of tonnage supply coming into supply-demand equation compared to years past. The BDI also is no long the same BDI has years past, suggested the UNCTAD writer, due to the rise of FFA market which counts players who are not providers or users of shipping as participants. The BDI is no longer about the currrent demand-and-supply balance but also about future expectations of this balance.

We have watched with interest as the shipping establishment comes to grips with what some quarters see as a hi-jacking by the financial types. While we are avid readers of the UNCTAD Transport Newsletter, the debate, surfaced after this was reported by Lloyd’s list (UN says Baltic Dry Index has lost touch with reality, 12 May 2009), which triggered a rather strong reaction. Some observers retorted that the “the BDI is the most daily and accurate report of the dry cargo freight market”.

This is only an excerpt of FFA & BDI

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