The BDI Song Bird

In pre high-tech coal mines the miners used to rely on a caged song bird to warn if there was a build up of dangerous gases. When the song bird dropped dead, it was time to quickly get out of the shafts.

Well, the BDI song bird is chirping its head off and going into death convulsions.

The Baltic Dry Index tracks the price of shipping bulk cargo. It is a concrete barometer of the global trade in economic building blocks like iron ore, coal and grain. The BDI is not a traded index so no one profits from the index itself, which makes it virtually manipulation proof. It is what it is; its numbers tell a fairly accurate story.

As recently as last June, around the same time that crude peaked at $147 a barrel, the BDI stood at a reasonably healthy 11,600. It has currently plummeted to 791. That’s about a 94% drop in goods actually being shipped worldwide.

Put simply, the cost of shipping has dropped through the floor. For example, sending a tonne of iron ore from Brazil to China in early June would have set you back more than $100 per tonne, or around $15m per voyage. But freight rates have now dropped to only slightly over $10 per tonne, or just $1.5m for the 70-90 day journey.

The BDI's plummet points towards unprecedented disaster around the world, especially as it relates to food. Products are simply not being shipped. The products aren't being shipped because there aren't any orders for them.

Of particular interest in the following video is the correlation between the decline in crude shipping and the tanking of the DPI.

[youtube=http://www.youtube.com/watch?v=SXATSV8S3-M]

DarthDubious, Song Bird #1

Hubris and Nemisis, Song Bird #2

The Independent, Song Bird #3