Dry bulk industry trends mean positive outlook for DryShips

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Nov. 21 2019, Updated 5:41 p.m. ET

Dry bulk industry

During the third quarter of 2014, DryShips, Inc. (DRYS) witnessed steady demand for the transportation of dry bulk commodities. As usual, the star performer was iron ore, which accounts for a considerable percentage of the total dry bulk trade. More specifically, Brazil and Australia’s third-quarter combined iron ore exports were up 16% year-over-year, according to the company. Australia’s exports alone increased by a whopping 26% year-over-year.

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Also, Chinese third-quarter iron ore imports were up 11.7% year-over-year, despite steel production only increasing by 4%.

Another pleasant development was India’s increased transportation demand for coal, which increased by 22% in August compared to year ago. India may finally become a net importer of iron ore, mainly due to mine closures and higher levels of domestic steel production.

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Trend analysis

Since the end of the quarter, key market developments have included increasing volumes of iron ore out of Brazil and tight Atlantic positioning. Also, India’s increasing appetite for coal has caused Capesize and Panamax rates to surge by 94% and 49%, respectively. These developments lend optimism to the expectation that the seasonal trade grade increase will occur again during the fourth quarter this year.

Outlook

Looking ahead, many factors are likely to positively influence the shipping market and the companies that play in it, including DryShips, Safe Bulkers, Inc.(SB), Navios Maritime Holdings Inc. (NM), Diana Shipping Inc. (DSX), and Navios Maritime Partners L.P. (NMM).

A continued supply of low-cost iron ore supply in the market should reduce some operating expenses for these companies. Lower-quality domestic Chinese production may lead to increased seaborne transportation demand. Last, strengthening coal demand from India and growing coal shipments from the US are now starting to hit the market.

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