Commodity Index, Baltic Dry Index and Container Shipping Rates, 2000-2022

Commodity Index Baltic Dry Index and Container Shipping Rates 2000 2022

Source: IMF, Baltic Exchange, UNCTAD and Shanghai Shipping Exchange. 2000=100.

The IMF All Commodity Index (IMF-ACI) is maintained by the International Monetary Fund, which tracks prices of internationally traded primary commodities, such as metals, foodstuffs, beverages, agricultural goods, and fuels. The Baltic Dry Index (BDI) is an assessment of the average price to ship raw materials (such as coal, iron ore, cement, and grains) on a number of shipping routes and by ship size. It is thus an indicator of the cost paid to ship raw materials on global markets and an important component of input costs. The Shanghai Containerized Freight Index is a composite figure accounting for shipping costs for a 40-foot container from Shanghai to major world ports.

Since 2000, the BDI has experienced much volatility and has climbed much faster than the IMF-ACI, which implies that in relative terms, the cost of shipping bulk commodities has grown faster than for commodities. A major reason is that new transport capacity is difficult to bring online when commodity demand rises. Thus, there is a comparative cost incentive to consider containerization as an alternative. The collapse of the BDI and the IMF-ACI in late 2008 and early 2009 placed bulk shipping rates more in line with their conventional relation with commodity prices. From 2010, a new diverging pattern was observed as commodity prices remained in a high range while the BDI tanked to lows not seen in a decade. This pattern endured until the COVID-19 pandemic, when a surge in container rates made commodities less attractive cargo in container shipping.

Compared with the BDI and the AMF-ACI, container shipping rates are showing much less volatility with rates remaining stable and even declining in the long term (in great part due to economies of scale). From a cargo value/transport cost per TEU proposition, the containerized shipping of commodities has become more advantageous. The value of the cargo has increased (3 times from the 2000 base) while the shipping rates have slightly declined.