Exploring the Factors Influencing the Impact of the COVID-19 Pandemic on Global Shipping: A Case Study of the Baltic Dry Index

Abstract

The outbreak of COVID-19 in 2020 resulted in notable disruptions to global shipping and the global economy. As a key indicator influenced by supply and demand conditions in the shipping industry, the Baltic Dry Index (BDI) serves as an early economic indicator for global economic production. Contrary to expectations of decline, the BDI has exhibited a substantial increase. This research paper aims to investigate the impact of the COVID-19 pandemic on global shipping through a comprehensive analysis of the BDI. The study incorporates data spanning from 2019 to 2021, encompassing the pre- and post-pandemic periods. It examines 13 independent variables, including raw material prices (such as iron ore prices), international scrap steel prices, energy prices, stock market indexes, international commodity price volatility (as represented by the Commodity Research Bureau Index), global port calls, and confirmed COVID-19 cases. The primary objective is to explore the factors influencing the BDI and how they were affected by the pandemic. The study employs stepwise regression to select variables and build models before and after the pandemic. The findings of this study elucidate the prominent factors that influence the BDI in different temporal contexts. Before the outbreak, the BDI was notably impacted by variables, including the US Dollar Index (positive relationship), Brent, Port Calls, and CRB Index. However, a discernible shift in the relative significance of these factors has been observed in the post-pandemic period. Specifically, the US Dollar Index now exhibits a negative relationship with the BDI, whereas variables such as Port Calls, Iron Price, Steel Scrap Price, and confirmed COVID-19 cases had attained heightened prominence in shaping the dynamics of the freight index. These findings underscored the dynamic nature of the factors influencing the BDI, particularly in light of the unique circumstances brought about by the COVID-19 pandemic.