Maybulk

The Baltic Dry Index and what it is telling us is sobering

From an historical perspective, shipping has often been considered one of the most accurate means of measuring present day and future global trade. The most commonly used measure of seaborne (non-liquid) international trade is the Baltic Dry index. What it telling us is sobering. Over the past 12-month period, the Baltic Dry (BDI) is off nearly 40%. From the yearly high to yesterday’s close, the drop off in trade, as measured by the BDI, is even more dramatic. On November 11 of 2014 the BDI closed at 1464.00. Yesterday the BDI closed at 587. The drop has been 59.9%. The Baltic Dry Index is a figure issued daily by the London-based Baltic Exchange. It takes all 23 major global shipping routes into account. A large majority of what is considered dry bulk are raw materials. The building blocks of economic growth; from coal to grains and iron-ore. The BDI is telling us that global economic growth is nearly non-existent. Slowing growth in China, anemic growth in the Euro-zone, Latin America, Japan and an unconvincing economic landscape here at home are all reflected in the BDI’s weak performance. Simply put, there is very little global demand for dry goods as measured by the BDI. That may change. For the time being however, the data we have been receiving that speaks to tepid Q1 growth here at home and sub-target economic activity globally have confirmation in the global trade data represented by the Baltic Dry index. A secondary theme that can be gleaned from the BDI price action this year is that those economies that are export dependent will have to aggressively engage in devaluing their currencies in order to gain a competitive pricing advantage in a world of weak demand. A stronger dollar is the last thing our fragile expansion needs. The counter in Bursamalaysia that is very much affected by the weakness in Baltic Dry Index is Maybulk.

The price of Maybulk is trending down for more that a year. There are two temporary buy signs (indicated by the green arrows) followed by a sell sign (indicated by the red arrow). Since there it is still below the 200day movinf average there is no sign of this counter making a reversal. Can stay out but do monitor it regularly in terms of Baltic Dry Index (DBI). I believe that the weakness of DBI is mainly due to overcapacity worldwide. This overcapacity will eventually kill off some of the less efficient operators leaving behind the more efficient and better managed companies like Maybulk. Hopefully, in some point of time Maybulk will shine again but for now it is better to saty clear of this counter and the right thing to do is just to keep monitoring the DBI and sign of price turnaround.