8. Major Commodity and Freight Indexes

8.1 Commodity indexes

Commodity indexes track the price performance of a basket of commodities, similar to how stock indexes follow a group of equities. These indexes provide a broad view of commodity market trends and are widely used for benchmarking, investing, and economic analysis.

Commodity indexes are a convenient and diversified way to gain exposure to the commodity sector.

Through ETFs and mutual funds linked to these indexes, investors can hedge against inflation, bet on macroeconomic trends, or balance equity-heavy portfolios. They're especially useful for those looking to avoid the complexity of trading individual futures contracts.

Key Index Construction Factors

  • Weighting Method: Indexes may use price, production, or liquidity weighting
  • Roll Yield: Since most indexes use futures contracts, rolling them can impact performance
  • Volatility: Energy-heavy indexes tend to show higher volatility
  • Rebalancing: Frequency varies (monthly, quarterly, or annually), affecting composition and returns
S&P GSCI (formerly the Goldman Sachs Commodity Index)
  • Heavily weighted toward energy commodities like crude oil and natural gas
  • Covers over 20 commodities, including metals and agriculture
  • Commonly used by institutional investors and sensitive to oil price movements
  • Link to official site
Bloomberg Commodity Index (BCOM)
  • Offers a more balanced weighting across energy, agriculture, and metals
  • Tracks around 23 commodities
  • Preferred by investors seeking diversified exposure without overdependence on oil
  • Link to official site
CRB Commodity Index
  • One of the oldest commodity indexes, using an equal-weighted approach
  • Covers 19 commodities across metals, agriculture, and livestock
  • Popular with traders for long-term trend analysis
  • See index in action
Solactive Indexes

Solactive is a Germany-based index provider developing tailor-made and multi-asset class index solutions. For details, see: solactive.com

8.2 Freight indexes

Freight indexes track the cost of shipping goods, especially bulk commodities, across oceans. While they're often overlooked by new investors, they play a critical role in commodity pricing, supply chain economics, and global trade flows.

When the cost to move a commodity (like iron ore or coal) rises sharply, it directly impacts landed prices, trade margins, and arbitrage opportunities. Freight rates can even make or break a deal.

Baltic Dry Index (BDI)
  • Tracks: Shipping rates for dry bulk commodities like iron ore, coal, and grain.
  • Significance: A widely watched indicator of global industrial activity and trade demand.
  • Components: Combines rates from three sizes of vessels: Capesize, Panamax, and Supramax.
  • Link to latest data
Freightos Baltic Index (FBX)
  • Tracks: Global container shipping rates (across many routes).
  • Use Case: Popular with logistics planners, e-commerce, and general merchandise sectors.
  • Link to official site
Shanghai Containerized Freight Index (SCFI)
  • Tracks: Spot container shipping rates from Shanghai to major global ports.
  • Relevance: Useful for tracking consumer goods and processed materials freight cost.
  • Link to official site

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