The Baltic Dry Index vs. the Baltic Dirty Tanker Index: Which Is a Better Indicator?

One shipping index is on fire. Another is being pummeled. Can both trends continue in the same universe?

The Dow Jones Transportation Index has been on a tear.

Yet two of its crucial components tell very different stories. The Baltic Dry Index (BDI) has more than quadrupled from its November lows. Genco shipping (GNK) and Eagle Bulk (EGLE) have participated in this rebound, climbing 166% and 100% respectively over a six month period. If you had waded into those waters, six months ago you would have been amply rewarded.

Contrast that to an important shipping index that most people have never heard of: the Baltic Dirty Tanker Index (BDTI), a compilation of international crude oil routes. This index has been collapsing, falling from 2204 to 485 over the past year.

That reflects the terrible pricing tanker companies receive for leasing their vessels. Clearly some of the oil tankers problems have to do with more vessels coming on line, weak capital access and decreased demand. But not all. Dry bulkers face the same issues. It's hard to see how the index can stay down in sharp contrast to a rising demand for the transport of iron, grain, and coal as evidenced by the BDI. After all, oil tankers do participate in a global economy. This last week, the BDTI has seen a fledgling increase. A more sustained strengthening in the BDTI would propel Nordic American (NAT) and Frontline (FRO). If the dry bulking industry is returning, can the BDTI be far behind?

Comments

[Stephen Ros...:]

Seekingalpha changed the title. It had been: The BDI and BDTI: a disparity that cannot go on for long. Both indices are excellent. The article argues that the dirty tanker index's drop is unlikely to continue in part because the sharp divergence of the BDI and BDTI cannot stand.

May 23 07:33 PM

[oilsands:]

Thanks for the commentary, a nice perspective no matter what the headline reads. I have to wonder why the BDI is so oft quoted while the BDTI is consistently ignored.

May 24 01:14 PM

[notsosmart:]

what makes sense in all this ponzi/casino scheme? im ok as FRO divs just about paid for the stock.they will come back strong soon.not too many ways to move a lot of oil. it will be the energy of the near future no matter what the spin is on altrnatives.

May 24 01:48 PM

[HerrHansa:]

https://riverlake.ch/reti.php?...

Riverlake is a Swiss company that brokers ships. Their index covers mostly European oil tanker movements.

www.marketwatch.com/in...

Here's another index, which deserves comparing to S&P 500. This index gives an equal rating across 17 companies, though it does not seem to be updated much to changes in the industry.

www.tankerworld.com
www.bunkerworld.com

Both these sites run indexes relative to the sectors upon which they report. Some good news items also. Sign-up required.

biz.yahoo.com/ic/775.html

Like or hate Yahoo Finance, their shipping index covers a wider selection of companies. While it might not tell you specifics about specialty carriers, it is another good to compare resource.

www.vesseltracker.com/app

The VesselTracker.com Google Earth plug-in is not an index, but can allow you to see ships near major ports. Indications include moored, anchored, or under way. Highly recommended visual tool.

Overall, there are many resources. If all you do is check BDI or BDTI, then you will miss what is happening. The indexes are a good start, but then you need to dig more. There are also many news sources with specific shipping coverage, as I mention in some of my other comments on Seeking Alpha. Anyway, that's enough for now, otherwise my comment might exceed the length of this article.

Disclosure: I hold DHT Maritime (DHT) and Golar LNG (GLNG)

May 24 06:51 PM

[Obamitall:]

Some of the disparity between the indexes may be the drop in vehicle use and therefore less oil required for the refiners. This past Memorial weekend was the quietest in ten years here in a little tourist town. No traffic.

May 26 06:28 AM

[HerrHansa:]

Simpson Spence & Young ship brokers also produce charts and indexes for each size of ship, though mostly Atlantic rates:

www.ssyonline.com/Reso...

Also, check out their most frequently updated reports:

www.ssyonline.com/Mark...

Obviously only one slice of the market. The idea is that if you are to invest in a company that has most of their ships in one market segment, then you can view how that segment is moving. Then you can more finally tune your decisions.

I was in La Jolla, California over Memorial Day, and it was very busy. The most interesting thing for me though, was walking around La Jolla later in the day. There are many closed storefronts up for lease. To see that in a very well off area does raise some concern.

May 26 06:21 PM