Executive Summary
As of 23 May '24, the Baltic Dry Index is testing a new support area on the uptrend line. There is a possibility of a trend reversal as BDI has been trending up for over a year now. A break of the uptrend will diminish the profitability of dry-bulking shipping stocks, making stocks in automobiles and construction companies less attractive. In conclusion, we recommend avoiding buying stocks positively correlated with the Baltic Dry Index such as Genco Shipping & Trading Ltd.
Why Should Investors And Traders Care About The Baltic Dry Index!
The Baltic Dry Index (BDI) is a major leading economic indicator of the health of the global dry bulking shipping market; it tracks the cost of moving raw materials ― iron ore, coal, building materials, and grains across the globe. Combining iron ore and coal creates steel, a key metal in automobiles and durables goods production. The cost of renting these vessels to carry the raw materials previously mentioned depends on customer demand; therefore, a falling index reflects lower demand and a rising index represents higher demand. By the end of this investment report, investors and traders will be able to make an informed decision based on the current trend of the BDI.
BDI Chart Analysis
Key Points
In the past five years, BDI has gone as low as 407, and as high as 5,526. Year-to-date, the Baltic Dry Index is down -13.8%; on a MoM and YoY basis, it is up 32% and down -4%, respectively. It peaked at 5,526 on 4 Oct '21. Its long-term support and resistance are around 500 and 3200, respectively. The Baltic Dry Index has traded above the 50-day moving average since Sep '23. The most recent long-term uptrend keeps finding higher support areas, but this time will likely differ.
The Baltic Dry Index VS Genco Shipping & Trading Ltd.NK
Investment Analysis
The demand for raw materials such as iron ore, grain, coal, and other building materials has increased since 12 Feb '23; however, this trend may reverse next month – Jun '24. Lower shipping demand for raw materials in automobile manufacturing and construction such as steel might negatively impact discretionary stocks. We recommend selling any shipping stocks exposed to daily fluctuations in the cost of renting dry-bulk ships. Genko Shipping & Trading Ltd. is up 33% year-to-date, and it's been uptrending since Nov '23; investors and traders should take their profits, sell covered calls, or wait for the next uptrend if not invested yet.
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