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Why the dry bulk shipping industry is weakening

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Nov. 20 2020, Updated 12:13 p.m. ET

The dry bulk shipping industry

Dry bulk shipping refers to the transportation of homogenous bulk cargoes by bulk vessels on an irregular scheduled line. Numerous factors like world economic growth and commodity supply and demand affect the industry. For example, the seaborne trade of dry bulk commodities like iron ore and coking coal expands with rising construction activities in the global arena. Therefore, we’ll discuss the housing sales in one of the parts of our series.

 

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China accounts for a major share of the imports and exports of key dry bulk commodities, so a slowdown in the economy’s development may dent the dry bulk shipping industry. Also, Australia and Brazil, the major iron ore and coal exporters also impact the dry bulk shipping industry. We’ll discuss iron ore and coal imports in the upcoming parts of this series.

Industry index and companies

On a year-to-date basis, the Guggenheim Shipping ETF (SEA), an index weighted with dry bulk shipping companies, dropped 11.3%. Adding to it, the Baltic Dry Index (BDIY) declined 62% year-to-date. A few of the important industry players include DryShips Inc. (DRYS), Navios Maritime Holdings Inc. (NM), Safe Bulkers Inc. (SB), and Knightsbridge Tankers Ltd. (VLCCF).

Series overview

In the following series, we’ll discuss some of the important metrics that drive the dry bulk shipping industry. To begin with, China’s PMI is one of the major yardsticks to ascertain the economy’s manufacturing growth and thus the demand for commodities. Then, we’ll analyze vessel values with the help of vessel prices for newbuilds, secondhand vessels, and the orderbook for dry bulks.

Additionally, we’ll cover China’s thermal power output data to show that reduced reliance on thermal power is leading to lower coal usage.

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