The fourth quarter was kind to dry-bulk shipping companies. With rates for their services reaching levels not seen since before the crash, dry bulkers will likely post strong profit and cash-flow numbers when they go public with their quarterly results later in February.

Indeed, for a brief moment in October, a few ship owners were lucky
enough to book their capesize ships on the spot market for voyages
paying $100,000 a day. Though six-figure rates were hardly the norm –
on average across the fourth quarter, capesize vessels scored day rates
of about $45,000 on the spot market — that’s still well above the
levels indicated by the hedging instruments used by the shipping
industry. The derivatives known as forward-freight agreements, or FFAs,
had called for average rates in the fourth period of about $35,000 a
day.

More to the point: $45,000 is more than enough for profits to roll in
at a fine pace for shipping companies. Anything above $50,000 is
considered historically strong, and enough to drive stock prices
higher.

Still, as all dry-bulk investors know, stocks prices in the sector
rarely move one way or another based on earnings reports alone.
Analysts for the most part have a clear view of how much money each
company will make in a given three-month period, since publicly traded
shipping outfits, more conservative than their privately held peers,
rent out most of their vessels under long-term charter contracts at
fixed rates. Private ship owners, ruled largely by magnates in Greece
and Norway, are much freer to roll the dice on the spot market.

Quarterly results, therefore, are to some ways of thinking beside the point when it comes to dry-bulk stocks.

Instead, the supply-demand prognosis looms the largest for investors.

On the demand side, everyone is trying to divine whether China’s recent
credit tightening will slow the blast furnaces of the world’s largest
steel-producing nation — and, if so, to what degree. So furiously have
those Chinese plants consumed iron ore in their rage to forge steel
that, through most of 2009, the People’s Republic almost singlehandedly
saved the dry-bulk business from the devastation suffered by other
merchant-marine sectors, most notably container ships.

Over the short term, the outlook for iron-ore demand looks to remain
robust, many analysts say. They base their bullish view on the April
deadline for annual negotiations between Chinese steel interests and
the world’s big three iron ore miners — BHP Billiton, Rio Tintoand
Vale. Because contract prices are expected to jump, China’s mills may
look to buy up as much iron ore as possible before a deal is struck in
April, stocking up when prices remain relatively cheap.

On the other hand, shipping rates weakened sharply during the second
half of January, before stabilizing the last few days. Many have
attributed the falloff to declining Chinese steel prices, or fewer
shipments into China ahead of the national New Year’s holiday, but the
decline was steep enough to cause broader-based concerns.

On the supply side, the great worry remains the orderbook, which
continues to cast a dense shadow over stock prices. Dry bulk observers
– from ship owners to brokers to shareholders — will be paying
attention to dry-bulk earnings reports in at least one significant way:
checking to see how many orders for new vessels these companies have
scratched, thus reducing future supply. The prevalent feeling is that
owners will need to annul (or at least delay) 30% to 40% of the ships
on order for delivery in 2010 to keep the supply-demand balance intact
and future rates steady.

But some analysts note that heavy port congestion — nearly 60 ships
have been waiting to pick up coal at the Australian port of Newcastle
– could help soak up the incrementally increasing number of dry-bulk
ships on the oceans. Then there’s the phenomenon of “ton-mile
expansion,” which refers to the increasing distances that ships must
travel between pick-up and delivery, as South American mines supply
more and more raw materials to China, as opposed to Australia.

It’s true that dry-bulk shares often move in tandem, since, at bottom,
business is the same from company to company. There isn’t much brand
differentiation, in other words. Still, company specifics do matter.
With that in mind, here’s a look at five popular dry-bulk outfits –
DryShips, Diana Shipping, Genco Shipping & Trading, Excel
Maritimeand Navios Maritime Holdings — and where they stand as they
finish out the first quarter of 2010.

Source: TheStreet

Search to find what you want

• Dry Bulk Shipping winners: Genco, Diana

    Dry-bulk shipping stocks advanced Monday as the broader equities market surged and shipping rates strengthened following the holiday slowdown. The Baltic Dry Index, a gauge of the dry-bulk spot market across vessel sizes, jumped 4.5% to 3,140 Monday, while the going rate for a capesize ship on the spot market

• Eagle Bulk Shipping Inc. secures four-Based Index Charters

     Eagle Bulk Shipping Inc. today announced that it has chartered four of its Supramax vessels at rates that are tied to the Baltic Supramax Index (”BSI”) which provides Eagle with the flexibility of earning strong rates in the spot market while retaining the stability of a one year charter. The Skua,

• Two Ways to Play: German Bank Upgrades Dry Bulk Shipping

    Deutsche Bank upgraded select dry bulk shipping stocks this morning. In a research note this morning, the firm upped its target on Genco Shipping to $31 from $24 and Eagle Bulk Shipping to Hold with a $4.50 price target

• Hottest Dry Bulk Shipping Stock: DryShips

    What’s the most popular dry-bulk shipping stock riding the equities-markets waves? The answer is about as surprising as “Yankees” in a poll that asks for a favorite baseball club. It’s DryShips, of course! The company garnered some 46% of the final tally, or about 3400 votes. Diana Shipping, the conservative ying

• No increase in freight rates for shipping companies to raise morale

    A rise of about 70 per cent over 45 days in the Baltic Dry Index (BDI), the global benchmark for shipping freight rates of dry bulk carriers, has failed to cheer Indian companies, who see it as only a temporary surge. On Tuesday, BDI was 3,615, up 67 per cent

• Mercator Lines plans to buy six tankers used

    Mercator Lines, the second largest private shipping company, is planning to buy six second-hand tankers this year as the company is looking to expand its fleet by taking advantage of the prevailing low prices globally. In today’s market, these six ships would cost between Rs 400 crore and Rs 600

• Iron Ore Spike Will Squeeze The steel producer

    The nascent iron ore swaps market implies that iron ore prices could stay elevated for the foreseeable future, as per recent data from ICAP. Most recently China-related prices have surged to new highs. This is good news for major ore producers such as Vale, Rio Tinto, and BHP, and not

• China Shipping Development Profit Drops 81% as a bulk prices slump

    China Shipping Development Co., the dry-bulk arm of the nation’s second-biggest shipping group, reported an 81 percent drop in third-quarter profit as rising overcapacity hammered commodity-shipping rates. Net income declined 81 percent to 292 million yuan ($43 million), or 0.0858 yuan per share, the company said in a statement today.

• Shipping and ETF Navigates Rough Seas

    Investors should hold off on dry-bulk shipping for now, and wait to add the Claymore/Delta Global Shipping Index ETFs to their portfolios until later this year. SEA tracks a cross-section of bulk and tanker ships, and shipping has struggled across the board

• Eagle Bulk Shipping assume the imperial eagle

     ?Final Newbuild From IHI Marine United Expands Fleet to 33 Eagle Bulk Shipping Inc.?today announced that it has taken delivery of Imperial Eagle, a ‘Future-56′ class, 56,000 dwt Supramax dry bulk vessel. The vessel has entered into a one-year time charter tied to the Baltic Supramax Index (’BSI’), ensuring Eagle

• Eagle Bulk Shipping Inc. undertakes the 28th Vessel

    Eagle Bulk Shipping Inc. yesterday announced that it has taken delivery of the Crane, a 58,000 dwt Supramax dry bulk vessel. The vessel has entered into a nine year time charter.

• Genco Shipping tops Street on Charter

     Genco Shipping & Trading the dry bulker, managed to beat Wall Street targets Wednesday, citing a strong dependence on time charters versus the spot market. The company, in its earnings release, played up the fact that it’s locked in shipping rates with long-term contracts, which has allowed it to avoid the volatility of

• No, the Baltic Dry Index does not forecast oil prices

    Dry bulk shipping’s Baltic Dry Index (BDI) has hit new highs for the year. And once again the BDI’s use as an ‘economic indicator’ is coming out of the woodwork.

• Eagle Bulk Shipping Inc. undertakes the 27th Vessel

    Eagle Bulk Shipping Inc. yesterday announced that it has taken delivery of the Canary, a 58,000 dwt Supramax dry bulk vessel. The vessel has entered into a ten year time charter.

• Eagle Bulk Shipping takes delivery of its 27th Ship

     Eagle Bulk Shipping Inc. announced that it has taken delivery of the Canary, a 58,000 dwt Supramax dry bulk vessel. The vessel has entered into a ten year time charter