Abandon ship: Baltic Dry index hits record low
A leading indicator of world economic growth, the Baltic Dry,
has plunged to its lowest ever level

By?Tara Cunningham,?Business Reporter | 3:04PM GMT 19 Nov 2015

The Baltic Dry Index, which is seen by many as a leading indicator of the state of the world economy, slumped 2.9pc to a record low of 504 today due, at least in part, to China’s economic malaise.

The index measures shipping costs for commodities including iron ore, copper and steel. It has fallen as demand for these cargoes from China has slowed.

The index, which is comprised of three-sub indexes that measure different sizes of merchant ships, is based on a daily survey of agents all over the world.

It hit a peak level of 11,793 in May 2008 amid a surge in demand for commodities, but has been in steady decline since the financial crisis.

In February this year it hit a low of 509 points – but this was surpassed earlier.

Rebecca O’Keeffe, of Interactive Investor, said: “With Chinese steel mills under intense pressure, many are running down their current inventories in an effort to stave off bankruptcy and this has resulted in a collapse in the volume of sea-borne iron-ore and coking coal.

 “This major shift in demand and the sustained pressure on commodity prices as a result of the changing Chinese landscape is a key reason why the Baltic Dry Index is at all-time lows.”

The Baltic Dry Index hits its lowest level ever of 504 points.

Could slowing world trade derail an interest rate rise in December?

Since hitting a high of 1,222 points this year in August, the index has plummeted 59pc. The fall in the index comes as copper prices dipped to six-year lows earlier this week, while iron ore hit its lowest level since July.

More than half of the world’s shipped iron ore goes to China. Demand for the commodity is still growing. But as growth in China slows, so has demand for steel – global trade in the raw material is now increasing at its slowest pace since 2001.

With renewed fears the outlook for Chinese industrial production has weakened yet again, Chris Beauchamp of IG, said the index had become one of the “victims” of depressed oil and copper prices, and may be a sign of “weakness” in the global economy.

Mr Beauchamp also said the autumn-winter period is generally a period of strong performance for the index.

He added that the sharp drop in the index could serve as another reason for the Federal Reserve not to raise interest rates next month.

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