A cargo ship being loaded with wheat in 2008, when freight shipping prices for transporting dry raw materials were languishing close to their lowest level in 25 years. The Baltic Dry Index, a key barometer which tracks the cost of renting ships to move goods, such as coal, iron ore and grain, across the oceans, tumbled then to 647 points. - 

Remember the Baltic Dry Index? It's a key shipping market index that leapt to prominence five years ago in the wake of the Lehman Brothers collapse. Then, the Index dropped like a stone, presaging that world trade would fall off a cliff. 


But should we be fretting that the Baltic Dry Index is tanking again today? 

"In theory, we should be quite worried," says David Osler, Financial Editor of the Lloyd's List maritime business newspaper. "The Index has halved since the end of last year -- the sharpest January fall for 30 years. This could be telling us something unpleasant about the world economy."

The Index is compiled in London by the Baltic Exchange, the world's biggest source of maritime market information. It records the cost of shipping dry, bulk commodities, like iron ore, coal, and grain.

A sharp fall in the Index could therefore predict a global slowdown. But not necessarily. The world's biggest importers of raw materials have been on holiday.

"Chinese New Year is always quiet," says Jeremy Penn, who runs the Baltic Exchange. "This year, Chinese New Year has come very early. So you have a natural hiatus in the market." 

And there's another reason for thinking that the big drop in the Baltic Dry Index may not be as menacing as it seems. The cost of shipping reflects not only the demand for raw materials, but also the supply of ships. Amir Alizandeh of the Cass Business School has been studying the accuracy of the Index as an economic predictor.

"If you have too many ships around, then this will result in a drop in the index," he says. "And that's the situation at the moment: We have too many ships chasing not enough cargoes."

The economic boom that preceded the collapse of Lehman Brothers had triggered a ship-building frenzy. All those extra ships have now been delivered, and the world has 60 percent more bulk carrying vessels than it needs.

But the world remains nervous. Economic recovery appears fragile. Here's a safe prediction: Economists and investors will continue to keep a wary eye on the Baltic Dry Index.