The prices of commodities took a hit in the first quarter as the strict lockdown led to heightened fear of a crash in demand for raw materials. However, the Baltic Dry Index (BDI) tells a very different story that is emerging.
The Baltic Dry Index provides a gauge of shipping prices for Dry Bulkers, which carry unpacked bulk cargo, such as metal ores, cement, steel, coal, and grains. A rise in shipping rate is synonymous with increased demand and prices for the product it carries.
The chart below highlights the recent recovery for both the BDI and major commodities. While the coronavirus had disrupted the global manufacturing output, we have seen signs that industrial production in picking up in China. Looking towards the US, we also have a significant chance that the US Government could push for an infrastructure stimulus package that could further boost the commodities prices.
Investors who would like to tap on this trend could invest in
1) Australian Dollar (AUD),
2) Commodities Fund
3) A long position on commodities futures
If you would like to gain exposure via investing in stocks, you could look at bulk carrier operators. Eg, Maybulk (Listed on Bursa Malaysia).