Current dry bulk shipping industry
In 2015 to date, the Guggenheim Shipping ETF (SEA), an index weighted with dry bulk shipping companies, has dropped 5.8%, and the Baltic Dry Index, or BDI, has declined 23.3%.
What is dry bulk shipping?
Dry bulk shipping refers to the transportation of homogenous bulk cargoes by bulk vessels on an irregular scheduled line. The industry is affected by numerous factors such as the growth of world economies (VXUS) and commodity supply and demand. Note that investors can gain exposure to commodities through the SPDR S&P Metals and Mining ETF (XME).
The dry bulk market is likely to be driven by the low cost of commodities across the board, which should lead to more trade among countries. In a recent report by Hellenic Shipping News, market research firm Allied Shipbroking is cited as noting, “with commodity prices still under pressure, and possibly slipping further as the US dollar gains ground, there could be room for extra demand to surface down the line.”
The research firm is also cited as saying that Chinese imports of iron ore have been on the rise since late February 2015. So, this is another factor favoring industry growth. What’s more, with the sliding value of the Brazilian real, Brazilian iron ore could gain the competitive edge. And, this could lead to a sharp increase in demand for longer haul routes.
This would likely force out some of the locally sourced supply in China, rather than affect the Australian-sourced supplies. The result would be positive for the dry bulk shipping industry.
In this series, we’ll look at some of the important metrics that drive the dry bulk shipping industry. For example, China’s PMI (or purchasing manager’s index) is one of the major yardsticks applied to ascertain the economy’s manufacturing growth and related demand for commodities. We’ll also look at vessel values by assessing vessel prices for newbuilds, secondhand vessels, and the orderbook for dry bulk ships.