Lower Shipping Costs

Below is a chart of the Baltic Dry Index, which has risen 12 fold in 18 months.

Such a parabolic rise is often met with a severe retracement.

Recently, it couldn’t trade above a recent mark (as noted in the ellipse) to make a ‘higher high’ but last week, it broke beneath a trend line and made a ‘lower low’.

Other indicators are also bearish.

I’ll look for it to mean revert to its 200 week moving average (blue line) but I think $900 is plausible. Look out below.

Then the next chart I have overlaid the nice correlated Iron Ore price.

The case for a lower Baltic Dry Index increases the probability of lower Iron Ore prices.

We are seeing may assets and securities in a battle to make a ‘higher high’ and if they can’t, we’ll see them making a double dip to recent lows.

Where parabolas have existed, expected lows to be tested but also broken. Reversion to the mean will be a more notable thing to look for.

With that, I think about mining companies exposed to this theme. 

I believe that lower shipping prices will more than offset a new 20% decline in Iron Ore prices.

December 27, 2021

By Rob Zdravevski

rob@karriasset.com.au.

#mining #shipping #RIO #FMG #BHP #ironore