For years now I have been tracking several economic indicators that I think are helpful to Timber Producers and Harvesters and principle among them is the ‘Baltic Dry Index’. It is a measure of the global demand for capacity of ocean shipping lines that haul everything from containers and cars to bulk wheat and corn, kraft pulp and raw logs, between international ports. This index is posted every day on my forestry blog (click here to visit) and it is a useful tool as we try to estimate when the global economic recovery might arrive.
Like a nervous host waiting for an important dinner guest, I keep peeking out the window so to speak, looking at indexes like this one, to see when this recovery might arrive. Hopefully it gets here before we run out of acorns. Lately this index is gaining some serious ground. To put it plainly it is showing some significant positive movement since February, ramping upward and showing a strong increase in demand for vessel capacity especially in the Pacific (China). The majority of the demand is coming from China’s massive stimulus program, driving iron ore imports to record levels. The pressure that China is putting on available vessels is creating shortages in the Atlantic and driving up freight rates between the US and other markets, even as total freight volume has declined.
You can learn more about the Baltic Dry Index by visiting this web link where you will find a great article about the index and how it helps us understand international ocean freight demand.
Another Index that is of great interest is the American Trucking Association’s ‘Trucking Tonnage Index’. This barometer measures the total amount of tonnage handled by US trucking companies and it is a very large representative sample that is considered to be an excellent indicator of trends in the market. Unfortunately like most reports it is always a backward looking tool, showing us what we in most cases already know and so it is more often than not a confirmation of what most of us are already thinking about the economy. For example we knew the market was off substantially in December of 2008 from the previous months. The index showed a catastrophic collapse, dropping over 11% in a single month. Currently the index is still dropping, 4.5% in March but only 2.2% in April. so even thought the index shows a decline, it appears to have bottomed out and perhaps May or June will show the first increase since November of 2008. Speaking with several long-haul trucking contacts I am hearing that haul volume is on the up-swing in recent weeks and that is a very good sign. It is a good sign because those trucks are hauling all kinds of products packaged in cardboard boxes and sitting on pallets and lovingly wrapped in paper products of every shape and kind imaginable.
You can visit the American Trucking Association’s website and read the full April article by following this link.
Another indicator that is of significant interest to our industry is oil futures as an sign of global outlook for economic growth and consumption (GDP Growth). Oil futures are rising slowly but surely along with the prices of many commodities that have in recent months been performing at record lows. This is a indication that there is at least mild sentiment that the market is moving in a positive direction. Large numbers of suppliers are securing future deliveries at current prices and in the process driving up the price of oil. This is thought to be based on the belief that it will rise on higher demand. Of course this is a self-fulfilling prophecy of sorts, but it is useful nonetheless.
I realize many forest products pro’s and timber buyers/harvesters have yet to see an impact. Nonetheless these indicators serve as a early warning system of sorts that winds are shifting in a positive direction. If you have news to share about your neck of the woods please comment below and share it with everyone. Be sure to tell us where you are and the type of product you produce, harvest or sell.
Until next time, God bless you and all our logging, sawmilling communities!