Is the Baltic Dry Index System ready for an upgrade? : a study of freight market indices

Abstract

We examine the shipping industry’s need and interest in changing the way that freight market indices are made. Our research is conducted due to recent changes in the shipping industry, with more competition entering the scenery. In addition to this, IMO2020 has sparked debate regarding how freight market indices are made, the methodology underlying these indices, and a call for transparency. Through in-depth interviews with Mark Jackson, CEO of the Baltic Exchange, and three other prominent voices in the shipping industry and a market-wide survey, we have mapped and synthesized the general attitudes toward freight market indices in the shipping market. The survey received responses from a wide range of market participants, capturing the opinions of respondents with different motivations for using freight market indices. Findings from the survey show that 76% of the respondents either want to explore alternatives to the Baltic Exchange indices or change the current methodology. We found that respondents wanting to explore alternatives to the Baltic Exchange indices were more sceptical of the broker’s assessments and see the indices as easier to manipulate. Our research provides relevant findings for both the creators and users of freight market indices as we present an overview of the market’s appetite for change. We have also mapped the attitudes of different market participants towards different methodologies. This can be of relevance for index-creators in their work with development and marketing of both existing and new products.