Soaring Shipping Gauge Doesn’t Spell Growth Boom

A closely watched index that tracks the cost of shipping commodities around the world is at its highest level since 2014. But analysts warn that the surge shouldn’t necessarily be taken as a bullish sign for the global economy.

While a rise in the Baltic Dry Index is typically seen as pointing to a broad uptick in economic activity around the world, analysts say the recent gains have largely been driven by a resumption of iron-ore shipments from Brazil.

The recent rally is more complex as mines run by

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resume production following a fatal accident earlier this year that kept them closed for months. The sudden increase in shipments has lifted demand for large ships transporting iron ore and other materials to China, pushing up the index 85% in the past month through Tuesday and to its highest level since January 2014.

It closed Tuesday at 2011, putting it 58% higher for the year.

Bullish investors are looking for signs the world economy is picking up steam, but some analysts are skeptical global growth will keep the Baltic Dry Index elevated. Measures of factory activity have slid recently, as have gauges of whether economic data points are broadly meeting expectations.

Global economic growth is still expected to slow this year as uncertainty continues to surround U.S.-China trade tensions and as businesses limit spending. Progress toward a trade deal has stalled while the Trump administration determines how to address Beijing’s demands that it ease restrictions on Huawei Technologies Co., The Wall Street Journal reported earlier in the week.

Although iron-ore prices have surged this year amid supply constraints following the mine closures, other industrial commodities have remained contained with demand expected to stagnate.

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Another factor potentially giving the Baltic Dry Index a short-term boost: new international shipping rules taking effect next year that aim to slash the amount of sulfur in marine fuel. New scrubbing technology will be used on some ships to lower emissions, another element that could skew shipping rates.

“While a large part of this strength is attributed to a pickup in iron-ore shipping activity, the other element is reportedly lower vessel availability due to ongoing scrubber installations,” ING analysts said in a recent note.

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Write to Amrith Ramkumar at amrith.ramkumar@wsj.com

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