Supply, Demand, and Slipping Shipments

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Supply & Demand

Manufacturing activity is expected to dampen alongside a slowing economy, and the Wall Street Journal recently pointed out one “steep decline” that indicates the serious nature of the situation. Commodity shipments are drastically dropping in number.

“A key index tracking commodities shipments has fallen 52 percent since the start of the month,” the WSJ reports. “The drop in the Baltic Dry Index underlines the extent of the U.S. financial crisis’ impact on growth in emerging markets and puts into doubt the ability of these economies to expand with North American and European financial markets mired in uncertainty.”

A predicting tool and indicator of the demand for raw materials, the Baltic Dry Index suggests that global growth should add 2.5 percent, one percent less than the average consensus. Further, a drop in the BDI could lead to more commodity prices plunging.

It’s a classic case of supply and demand, as the Baltic Exchange notes too many ships and not enough cargo. To put recent declines in perspective, take a look at the numbers: “Iron-ore prices have declined in the past month by 25 percent between India and China and 24 percent between Brazil and China. Base metals are also down. Copper traded on the London Metal Exchange has fallen 31 percent since its July record high of $8,940 a ton and global steel prices in September were down 9.8 percent on the month.”

–Amy Edwards

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