News carried by Splash on Friday that the Baltic Dry Index could be tweaked whereby the handysize component could go has provoked much debate.
The Baltic Exchange, now owned by the Singapore Exchange, is exploring the idea of taking the handysize index out of the BDI to improve the average liquidity of the underpinnings of the index to potentially support its use as a derivative instrument in future. The Baltic Handysize Index (BHSI) would continue, but would not be part of the BDI, which instead would focus on capes, panamaxes and supramaxes.
Futures liquidity in the BHSI contracts is low underpinning the Baltic’s keenness to make the change.
However, the Baltic’s plans have received criticism in some quarters. Khalid Hashim, the veteran boss of Thai dry bulk owner Precious Shipping, told Splash on Friday: “The changes being proposed are not useful at all. To remove such a large segment of the market from the calculation of the BDI is patently wrong.”
John Banaskiewicz, managing director of the UK’s Freight Investor Services, backed the mooted change, telling Splash today: “The Baltic’s plans for the BDI are designed to strengthen the index and make it more relevant and attractive as a tool for trading, something that doesn’t happen at the moment.”
Handy owners can still use the Baltic Handysize Index to hedge, benchmark and do index-linked business, Banaskiewicz stressed. “Focusing the BDI on capes, panamax and supramax plays to the strengths of the index because there is liquid FFA volume to support the underlying market,” Banaskiewicz added.