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What’s Driving Dry Bulk Shippers’ Performance?

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Updated

Dry bulk shipping performance

The year 2015 hasn’t panned out as many dry bulk shippers expected it to. The BDI (Baltic Dry Index) tested 30-year lows in February. There was a restocking-driven recovery in the sector, particularly the Capesize segment. However, it did not last long. The Guggenheim Shipping ETF (SEA), which is an index weighted with dry bulk shipping companies, has fallen by 23% YTD (year-to-date). The BDI has risen by 22%. We’ll discuss this in more detail later in this series.

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Most of the players in the dry bulk shipping space have fallen since the beginning of the year. DryShips (DRYS) has fallen the most by 85% YTD as of September 28. Its very high leverage in a weak-rate environment has led it to take drastic measures, including distressed sales of vessels. This has resulted in such a drastic decline in share price YTD. DryShips is followed by Star Bulk Carriers (SBLK), which has returned -64%. Navios Maritime Holdings (NM), which forms 2% of SEA’s holdings, and Safe Bulkers (SB) have fallen by 37% and 26%, respectively, YTD. Navios Maritime Partners (NMM) was doing better until July. Since the end of July, it has fallen by 33%. Diana Shipping (DSX) has been the best performer. It has risen 1.2% YTD. This rise has been driven most likely by lower leverage in a weak market.

Investors can gain exposure to commodities through the SPDR S&P Metals and Mining ETF (XME).

Series overview

In this series, we’ll discuss some of the important metrics that drive the dry bulk shipping industry. First, we’ll analyze the dry bulk shipping market’s medium- and long-term outlooks by studying vessel prices for newbuilds and secondhand vessels. We’ll also look at the dry bulk orderbook. Then, we’ll analyze China’s (FXI) manufacturing activity as measured by the PMI (purchasing managers’ index). We’ll also discuss iron ore and coal imports and exports among significant trading economies.

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