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Overview: Why dry bulk indicators are gaining firm ground

Overview: Why dry bulk indicators are gaining firm ground (Part 1 of 7)

Introduction to the dry bulk shipping industry

Dry bulk shipping industry

The dry bulk shipping industry is affected by numerous factors like the growth of world economies and commodity supply and demand. In light of the various world economies, China’s economy growth rate and it being an important commodity market affects the dry bulk shippers’ movement significantly. Meanwhile, other economies like Australia and Brazil are major iron ore and coal exporters. They also impact dry bulk shipping industry.

Price perfEnlarge Graph

On a year-to-date (or YTD) basis, the Guggenheim Shipping ETF (SEA), an index weighted with dry bulk shipping companies, has dropped 29%—a positive indication for investors.

DryShips Inc. (DRYS) and Navios Maritime Holdings Inc. (NM) are the two major market players in the dry bulk shipping industry. The industry has other players like Safe Bulkers Inc. (SB) and Knightsbridge Tankers Ltd. (VLCCF).

In the following series, we’ll discuss how China’s steel production, iron ore imports, and inventory levels at ports are having an impact on the industry. Also, we’ll see how the country’s real estate market scenario supports the dry bulk shipping industry.

Moving towards the broader context, we’ll look at how China’s purchasing managers’ index (or PMI) supports the economy’s growth levels and its crude steel production peaking to record levels. Meanwhile, for the overall dry bulk shipping industry it’s important to understand how stable vessel prices also cushion the industry’s positive performance. We’ll also look at the Baltic Dry Index performance.

To begin with, let’s take a look at China’s PMI and its impact on the dry bulk shipping industry.

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