Tuesday, October 28, 2008

Shipping Rates

A good friend of mine pointed this out to me several years ago: Baltic Dry Index

It is a measure of shipping costs for raw materials, like coal, commodities, etc. It does not measure shipping costs for finished goods. The Index is considered to be an excellent predictor of inflationary forces.

Rates vary depending on ship size, delivery site and delivery date. The Capesize component of the index (largest ship class: 100,000 dead weight tons) commanded a rate of $172,000 a year ago, up from roughly $20,000 in 2005. Yesterday, it would have cost $8,000. Stunning.

Fuel costs, ship shortage and commodity demand all contributed to the price run-up. Now, all of those components have eased dramatically.

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