Ocean freight rate index at historic low, again

CNS Canada –– The Baltic Dry Index, which gauges the price of moving grain and other goods by sea, is down to new historical lows, less than a month after setting the former floor.

The BDI, compiled daily by the London-based Baltic Exchange, was quoted at 471 points on Wednesday after falling below 500 points the previous day for only the second time since records began in 1985.

The index was trading above 1,200 as recently as the beginning of August, but fell to 498 on Nov. 20. It saw a modest correction off of that former historical low into early December, but has returned to its downtrend in recent weeks.

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An overcapacity of ships, a slowdown in Chinese demand for building materials, weakness in crude oil and declining commodity prices have all been cited as contributing factors to the lower freight rates, according to freight analysts.

As far as Canadian grain and oilseed exports are concerned, the lower freight rates even the playing field in some cases by lessening the importance of shipping costs in the final price to the buyer.

For example, while Australia will always be closer to China than Vancouver, lower freight rates lessen the importance of shipping costs in the final price.

Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow CNS Canada at @CNSCanada on Twitter.

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