BDI - 25 year low

The lack of cargo demand combined with the huge oversupply in capacity, BDI has plunged 60% since the starting of 2012 to closed at 647 last Friday for a 25-year record low.

The low freight rate and idling capacity will add more problems to the European banks that hold about US$500 billion in shipping loans and face nearly US$100 billion in losses to restructure them if shipping companies cannot pay their loans.

And meanwhile most macro-economic forecasters are issuing warnings about a significant slowdown in economic growth for 2012.

In the commodity futures market, the volume traded remains high. But by comparing the volume traded since 2004, one will notice that since 2008 the traded volume has surged suddenly by more than 50% although BDI has plunged.







The sudden surge was due to the excess liquidity and the speculative buying and selling of the future contracts without physical delivery/taking of the commodity traded. Regulator got to stop this speculation in commodity trading in order to reduce volatility and sustained high prices. These financial speculators are the one that causes the high food prices, hunger and the Jasmine revolution.



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