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BALTIC DRY INDEX AND ITS USE IN INTERNATIONAL LOGISTICS OPERATIONS
07.06.2022 11:24
[2. Економічні науки]
Автор: Berenda Sergiy, PhD, Associate Professor, V.N. Karazin Kharkiv National University, Kharkiv; Nikitchuk Nina, bachelor, V.N. Karazin Kharkiv National University, Kharkiv
In a market economy, the situation means the state of trade relations, i.e. the analysis of markets at the regional, national and global levels at a specific time. Well-known economist W. Mitchell [1] created an economic barometer, which can be used on the basis of statistical methods to characterize the development of trade relations and business cycles. Conjuncture can be used to determine the level of competitiveness of enterprises and establish their role in world trade.
Among the factors influencing market conditions are the following: supply and demand, scientific and technical progress, inflation, public policy, GDP, social conflicts, pandemics, etc. The main indicators of market conditions include the volume of orders, i.e. the activity of a market economy; level of stability and variability, etc. Between the systems of indicators of significant importance are the so-called peculiarities of market conditions such as: contradictions, unevenness, unity of opposites, lack of stable nature of activity.
Freight indices represent the situation in the logistics services market. These are the most important indicators that significantly affect trade relations. The main logistics indices are: Harpex, Clarkson, Baltic Dry Index (BDI) and others [2].
The world freight market is one of the most important components of the commodity market. Its share in world trade is 80%. In a market economy, the freight market is understood as a market for logistics services, which provides services for the delivery of goods around the world by sea and river transport. The participants in the shipping market are charterers (cargo owners), carriers and intermediary companies. The main characteristics of the market of logistics services of maritime transport include: division by various characteristics, division into geographical areas of navigation, etc. There are two forms of organization of the shipping market: freight market of liner and tramp shipping. The main difference between the market of tramp and linear tonnage is the different nature of work. The freight tramp market is engaged in the transportation of bulk cargo on the basis of a charter agreement, while the liner shipping market is engaged in the transportation of general cargo in conditions of free competition according to a pre-announced schedule.
BDI is a harbinger of world trade because it can predict the functioning of a market economy. It was established in 1985 by the Baltic Exchange. At the time of its formation, the indicator of economic activity was called the Baltic Freight Index and was a list of geographical areas of navigation. In 1999, the Baltic Maritime Exchange changed the name of the Baltic Freight Index (BFI) to the Baltic Dry Index (BDI), which consists of 23 routes. The stages of calculating the BDI include: determining the actual average freight rates on all routes, calculating the rate for each type of vessel, finding the average rate for freight services.
This indicator is mostly used in the formation of the maritime transport market because it measures the level of freight rates for the transportation of only dry bulk and bulk raw materials, such as cement, coal, grain, iron ore and others.
The formula that calculates the average level of rates includes such elements as: the price for the carriage of goods for each type of vessel that is part of the BDI; the average rate of time charter operations and a multiplier of 0.113473601 [2].
The BDI research methodology is based on traditional statistical methods, artificial intelligence methods and methods of creating models that study the level of fluctuations in the logistics services market. The most important stages of forecasting market trends include: creating algorithms, processing information, registration of research results on the process of forecasting the freight market. The study of the BDI research methodology helps to analyze the structure and activity not only of the maritime logistics services market, but also of other markets that shape world trade relations.
In international trade, the BDI is one of the most important indicators that has the ability to predict the performance of a market economy. Unlike other indicators that also significantly affect the development of trade relations, BDI is complex because it includes four sub-indices that measure freight rates for different types of vessels, such as Capesize, Panamax, Supramax and Handysize [3].
The study of the components of the index allows to form the main features that are an important element of the most important indicator. The importance of BDI in trade relations is emphasized by its ability to analyze the state of the economy in real time and anticipate possible crises as a result of political and social issues.
The development of BDI is important in the formation of trade relations at the international level. Since its inception, its value has been 1,000 points. Every year there was an active development of BDI. In the first half of 2008, the value of the index was 11,793 points [4].
But six months later, the global financial crisis took place, as a result of which the "forerunner" of the economy lost its credibility. The resumption of active markets began in 2010. During this period, China had a high level of maritime transport for the transportation of raw materials. In the period 2017-2018, passive activity was observed in the freight market, as the market activity was chaotic. Establishing restrictions and clear rules for trade between countries has helped regulate the logistics services market. In 2019, the COVID-19 pandemic caused supply delays and thus reduced the index. The sharp decline in BDI in the second half of 2021 predicted a loss of trade in the first half of 2022. In the period of 2022, as a result of russia's invasion of Ukraine, there was an increase in prices for goods and transportation services and, accordingly, an increase in the index [5].
BDI can significantly affect the development of the stock market. The stock market and the maritime transport market are closely linked. When investing in the business of logistics services in maritime transport, investors need to know the trends in supply and demand in the freight market and determine a favorable time to enter the market.
Thus, BDI can serve as a reliable indicator of global commodity markets and can serve as a source of management decisions not only in the field of logistics business.
Literature
1. Mitchell, Wesley Clair, and Arthur F. Burns. "Statistical indicators of cyclical revivals." Statistical indicators of cyclical revivals. NBER, 1938. 1-12.
2. Carol M. Kopp (2021). Baltic Dry Index (BDI) // Investopedia [Електронний ресурс]. – URL: https://www.investopedia.com/terms/b/baltic_dry_index.asp (дата звернення 12.05.2022
3. Understanding the Baltic Dry Index // Learning Markets [Електронний ресурс]. – URL: https://www.learningmarkets.com/understanding-the-baltic-dryindex/ (дата звернення 03.05.2022).
4.Liu Mingxi., Zhao Y., Wang J., Chang Liu., Guowen Li. A deep learning framework for Baltic Dry Index forecasting. 2022. P. 821-828 // Science Direct [Електронний ресурс]. – URL: https://www.sciencedirect.com/science/article/pii/S187705092200103X (дата звернення 18.05.2022).
5. What is the Baltic Dry Index and how does it work?? (2016). // SHIPPING AND FREIGHT RESOURCE [Електронний ресурс]. – URL: https://www.shippingandfreightresource.com/baltic-dry-index/ (дата звернення 03.05.2022).
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