The Baltic Dry Index and Why You Should Care About It

The news is that the Baltic Dry Index is rebounding.  What that means for you, me and the stock market can be worth a real investment in time at least — to know what a relatively obscure daily signpost like the BDI can portend.  Now, to be fair, the BDI went from an epochal high not long ago to a dismal slough of despond, beaching shipping stocks like fish in a drying lake.  But the recovery has been fairly impressive.  You can see the free-fall and the beginnings of recovery in this chart from Bloomberg (

Baltic Dry Index, courtesy Bloomberg 2-12-09

Baltic Dry Index, courtesy Bloomberg 2-12-09

Most obviously, since the BDI is a daily metric that is based on the rates being paid for marine transportation of “dry” cargoes (grain, ore, scrap steel, coal), a recovery in this important though little-known index can mean much better times for marine transport companies that run fleets of “bulkers” (which is what dry-bulk ships are called).   That would include a number of Greek shippers, such as Athens-based DryShips Inc (Nasdaq: DRYS,, which closed yesterday at $5.29, down from a 52-week high of $116.43 (!).  It would include Diana Shipping Inc, also Athens-based (NYSE: DSX,, which closed 2-11 at $14.54, down from a high of $41.10, which is a much smaller drop than DRYS, most likely based on the more conservative balance sheet debt ratios maintained by DSX.  It could include  Athens-based Excel Maritime Carriers (NYSE: EXM,, which recently underwent a change of management, and which closed at $7.73 yesterday, from a 52-week high of $60.99.  Also worth looking at is Athens-based Top Ships Inc (Nasdaq: TOPS,, which operates both bulkers and tankers (as ships that carry “wet” cargoes are called — crude oil, gasoline, cooking oil, etc).  TOPS, which went through a time of trial while some of its competitors were living the high life, has recently roared back to profitability, with a $1.48-per-share EPS for the Sept 30 quarter of 2008; even so, its stock closed yesterday at $1.69 vs a year-high of $10.70.  Given the striking ratio of recent earnings to price, TOPS may be in a position to attract more attention than its peers.

But the BDI has meaning beyond shipping, and that is the purpose of this article.  When bulkers are more in demand, it can mean several very important things.  Bloomberg notes this morning that grains are rebounding as importers from Asia and the Middle East get hungrier, given crop failures or disappointments  in China and central Asia.  That same article points out that the BDI rose for the 17th straight day as “demand to ship coal and iron ore boosted . . . rates to a 4-month high.” 

Tammo Greetfield, senior equity strategist of Milan-based UniCredit Group, was quoted on CNBC this morning as saying that the recovery in the BDI bears out the view that cyclicals are in for a bounce — and his firm is overweight now in basic resources, chemicals, construction & materials, insurance and utilities. (  If that is so, then the companies we mentioned in our article recent on cement and construction could also be worth looking at: Hong Kong-based KHD Humboldt Wedag International Ltd (NYSE: KHD, prime among them.  KHD, with an unusually strong cash balance, negligible debt, and more than $2 per share in anticipated earnings for 2008, closed yesterday at $9.80, vs a year-high of $35.79.  By most measures, that means that KHD is selling for less than the value of its cash, in spite of an impressive record of  growth and profit.


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