After falling like a knife for months, oil prices seem to have found a steady floor around $40 for the past few weeks, an indication that perhaps somewhere, someone is doing something that requires energy. Meanwhile, the pundit-favourite Baltic Dry Index, the measure of shipping prices, has also been on a steady rally. Maybe a sign that people have something to ship again. Maybe.
WSJ says there’s a caveat:
The Baltic Dry is heavily influenced by commodity demand from China. Snowstorms, the Olympic Games and other China-centric phenomena sparked the index’s leaps and swoons last year. The current rally is largely due to China’s rebuilding iron-ore inventories after the Lunar New Year holiday. Many observers doubt that the restocking will last much longer and see little appetite for commodities outside of China.
Investors seeking confirmation of demand for commodities will need to look elsewhere. One place to start is the world’s biggest steelmaker, ArcelorMittal, due to report fourth-quarter 2008 earnings Wednesday morning.
We’ll see what they have to say.