CNS Canada — The Baltic Dry Index has seen some strength over the past two months, rising to its highest levels in nearly three years.

The BDI settled Monday at 1,355 points, having gained roughly 500 points over the past two months. The index was last this high in November 2014.

The BDI is compiled daily by the London-based Baltic Exchange and provides an assessment of the price of moving major raw materials by sea, including grain.

Solid Chinese demand for coal and iron ore accounted for most of the strength in the shipping sector in general, with gains in the largest capesize class of vessels accounting for nearly all of the recent advances in the BDI, according to a report from Bimco (the Baltic and International Maritime Council).

Bimco also notes that rising demand and the resulting strength in the BDI often correlates with a reduced focus on the supply side, which could mean demolition of old vessels may see a slowdown.

The industry group expects the supply of dry weight tonnage (DWT) to increase by 2.7 per cent in 2017, as new builds offset expected demolition. However, “for the recovery to stay on track, the supply side must be handled extremely carefully as the demand growth is expected to be around 3.5 per cent.”

Rising freight rates can put Canadian grain exports at a freight disadvantage in the global marketplace, due to the country’s distance from major demand centres, such as Asia and Europe, compared to its competitors.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.