The Baltic Dry Shipping Index, a leading economic indicator used by market insiders to gauge global demand for dry commodities, hit another year-high on Wednesday, helped by strong cargo demand. For many, this is a positive indicator for future economic activity.
Urs Dur, vice president and logistics analyst at Lazard Capital Markets, discussed the index's significance and what investors should expect going forward.
“There’s been very strong demand for dry bulk goods—iron ores and coal—this year, much better than containers in a general sense and better than oil. And that has helped freight rates and congestion in ports,” Dur told CNBC.
Another index, the Harpex, focuses on container freight. It provides an insight on the transport of a much wider base of commercial goods than commodities alone.
“With the Harpex and the container shipping indicies that are looking at how much container ships are earning, you have to understand that there is an oversupply of container ships,” Dur explained.
“So there are low rates on container ships just to get moving—that doesn’t mean that volumes aren’t increasing from the bottom.”
“And we’re seeing better volumes on containers moving through ports over the last 7 to 8 months—that is good,” he said. “So this may mean a low point for container asset values; it may be a low point for container freight rates.”
Dur recommended that investors look into the China Containerized Freight Index,which trades out of the Shanghai shipping exchange, and Aegean Marine Petroleum Network . He has a “buy rating” on Aegean.
- Watch Dur's Latest Appearance on CNBC (April 21, 2009)
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Wednesday's Top Dow Gainers:
Bank of America
Merck
Pfizer
Home Depot
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Disclosures:
No immediate information was available for Dur or his firm.
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