After months in the doldrums, the Baltic Dry Index (BDI) is showing signs of recovery.

The benchmark index routinely used to price commodity shipping costs on various routes - which has been depressed by the lack of letter of credit (L/C) availability - has suddenly doubled in value.

Slight improvement

According to the index, freight activity in the dry bulk shipping sector has picked up slightly, but shipping analysts remain concerned about problems with securing L/Cs' preventing the BDI from rising on a sustained basis.

The BDI has plummeted since mid-2008 when it peaked at more than 16,000 to hit a low of 650 in November last year. Within the last month it has more than doubled to 1,815.

Cautious notes

The rise is thought to indicate that China is starting to import more raw materials in advance of the country's massive fiscal stimulus and infrastructure programme.

Amongst those expressing caution over the BDI's slight revival is Alex Chan, an analyst at National Bank of Greece.

He reckons the BDI has risen too fast and will settle at between 2-3,000. He sees problems ahead, including a continuing dearth of L/Cs and new excess shipping capacity.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.