When Shipping Costs Plunge

The Baltic Dry Index, which measures international shipping costs, was fixed today at 2,503, down 9% on the day and down 79% from its May high of 11,793. It’s a volatile index, and these levels are hardly unprecedented: the index was below 3,000 for a good year from mid-May 2005 onwards.

But that doesn’t stop me being astonished that we’ve suddenly woken up in a world where a Panamax ship, the Dong Sheng Ocean, is rumored to be taking iron ore from the Persian Gulf to China for free.

I think this is good news, actually. Shipping costs have for the past couple of years been a serious constraint on international trade, and if they stay low, that’s a helpful lubricant in terms of the real global economy. It’s clearly the non-financial sector which is going to pull us out of this recession, and low shipping costs will help on that front.

(HT: Kedrosky)

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