The Index is a commercial statistical set of numerical factors describing various shipping

criteria. It was first officially codified in 1985, however, the history of the earlier

rudimentary basis of the Index dates back over two hundred years to the Virginia and

Maryland coffee house on Threadneedle Street, London. Various individuals having

commercial interests met at the coffee house to discuss the various opportunities in the

Baltic trade as early as 1744.

Within seventy years the meetings were transferred to the Antwerp Tavern where the

spirit of greed fiercely gripped the participants. If it were not for the formation of a group

of local leaders the frenzy that captured the Tavern group would have sunk the entire

assembly. These chiefs acted to standardize the group by organized regulation of the

market house including membership rules. As time went on, the system evolved so that

the by the year 1900 the Baltic Exchange would receive the London Shipping Exchange

into its membership.

In its long life the Baltic Exchange would create several cargo statistics, suffer terrorist

bombings and change locations several times to its present location of 38 St. Mary Axe.

The Exchange’s current Baltic Dry Index (BDI) dates to the year 1985 as cited

previously. It tracks the route and time as well as materials and shipping for various

commodities. In particular, the statistics cover several different types of freight container

ships. Amongst the types of vessels indexed are the Handymax, Panamax, Capesize dry

bulk and Supramax ships.

All of these factors are correlated together into a system that daily tracks costs from the

various routes folded into index. Brokers are contacted so as to aggregate the raw

information into a uniform whole providing market participants a concise and easy to use

data stream. In this manner the supply demand economic fundamentals between goods,

shipping rates and demand for the same can be assessed accurately and efficiently. All of

this is effective at rapidly determining the rise and fall of raw materials good as a result

of increased demand. As an example, when a particular ore or raw material has an

increase in demand the index will increase and the reverse is true a drop in material prices

has a concomitant drop in the index.

It should be understood that ships are static commodities since it takes a long time frame

to produce one. Thus, any increase or decrease in demand will directly relate to the rise

and fall of the index as described previously. Since the BDI closely tracks demand across

a variety of commodities, the index is viewed as a leading indicator of global economic

performance. The recent economic crisis beginning in 2007 saw a high watermark for

the BDI above 11,000. However, this peak only signaled the beginning of the end as it

fell in a crash diving to less then 10% of its highs. As a result, ships world wide began to

be parked by owners highlighting the global economic meltdown still underway.

Whatever happens to the world economy, the historical Baltic Dry Index will provide a

broad and early indicator to be watched by those in the know.