An interesting article over on SeekingAlpha recently “Baltic Dry Index’s fall misleads investors.” The author pointed out that while the BDI is down, there is also a surplus of ships, so that the BDI weakness is not entirely due to lower levels of trade. Among the discussions that followed was a comment/question about the seasonality of imports and exports. I collected data from the Port of Los Angeles and trade the Census Bureau. The chart below shows US exports of goods (not services) plotted against port activity at Los Angeles. Not surprisingly a good correlation but I’m not sure if you can glean any seasonal trends from the data (and the data pre-2000 is much the same).

The import data correlation is not quite as good as the export data but it is tempting to conclude that some sort of seasonal pattern exists with import lows earlier in the year. Incidentally for a very clear example of a seasonal trade pattern have a look at imports from China.

So part of the rebound in import activity could be viewed as a seasonal pattern. We can assume that the decline in imports reflects the fall in consumer demand and/or a fall in anticipated consumer demand by importers.

Pretty much every metric you can find collapsed (overshot?) early in 09. The data shows an increase in containers being moved since the numbers collapsed, and an increase in trade in (declining) dollar terms, but also shows that we are some ways off from a true recovery.

Baltic Dry index · China · US trade

Today I thought I’d plot the Baltic Dry Index (BDI) versus spot base metal prices over the last 5 years, as of the end of August 2009. Similar plots can be made for most/many commodities.

We can see the point earlier this year–the rise in the BDI–when China began stockpiling copper (and some other minerals/metals). Copper stockpiles also declined at about this time. Chinese stockpiling presumably ended a few months ago because we’ve seen a rise in LME copper stockpiles indicating a drop in demand. The BDI began dropping at about the same time. Nevertheless despite the signs of decreasing demand copper, and other base metals, spot prices keep marching upward. So we have the BDI declining-which can be interpreted as decreasing demand-we have LME stockpiles rising-which can be interpreted as decreasing demand-yet we have LME prices rising. Punters are clearly betting on a global recovery. Either a correction is on the way, likely to occur when speculators conclude increasing demand is still some time off, or real demand, from an eventual global recovery, is going to have to pick up.

Baltic Dry Index vs spot aluminium prices

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aluminium · Baltic Dry index · copper · lead · nickel · tin · zinc