Dry bulk shipping companies transport iron ore more than any other commodity. So it’s important for investors to watch shipments from the world’s largest iron ore exporters.
The historical dividend yield for Navios Maritime Partners reached its highest point of 41% in 2008, when the broader market was doing very poorly, which spooked investors after the Lehman Brothers crisis.
Since releasing its 3Q15 results on November 3, Navios Maritime Partners has fallen by 50%. NMM cut its distributions by 52% from $1.77 per unit to $0.85 per unit annually.
The iron ore inventory levels at Chinese ports can impact purchasing decisions. When the Chinese market (MCHI) rises, shipping stocks tend to rise as well.
The BDI (Baltic Dry Index) fell for 21 straight sessions to an all-time low of 498 on November 20. This is the lowest value since the BDI started recording in 1985.
So far, 2015 has been the worst year on record for the dry bulk shipping industry. After February, market participants got concerned about the industry’s future.
The Baltic Dry Index has fallen 15.7% in the first 26 days of October. This is after a 1.2% fall in the month of September. Most of the fall is due to the Capesize rates decline.
Industrial production remains an important gauge of economic activity. Greece’s IIP (industrial production index) rose 4.5% in August 2015 from August 2014.
China’s iron ore port inventory has been declining consecutively for the past five weeks. For the week ending September 18, inventories stood at 80.55 million tons, according to the data collected from 44 ports in China by SteelHome.
For the first eight months of 2015, China’s coal imports have fallen by 31.4% YoY (year-over-year). In August, China imported a total of 17.5 million tons of coal—a decline of 17.7% month-over-month.
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.
The BDI (Baltic Dry Index) is a leading indicator for the bulk shipping industry. It’s a measure of the cost of shipping major bulk commodities on a number of shipping routes.
Hedge funds like Caspian, Oaktree, and Monarch are going against the crowd by pinning their hopes on the assumption that SBLK’s share price has reached its floor.
Navios Holdings and Safe Bulkers have dividend yields of 8.8% and 1.3%, respectively. In contrast, Naviois Maritime Partners has an attractive 21% dividend yield.
Investors should take note of the short-term liquidity profile for dry bulk companies. In a weaker shipping rates environment, short-term liquidity could come under increasing pressure.
Diana Shipping (DSX) has the lowest financial leverage with debt to assets of 33.2% as of June 30. Companies with the strongest balance sheet can weather the weakness for a longer time.
Dry bulk shipping companies usually work under two types of contracts: spot charter and time charter. Spot exposure measures the extent to which vessels are exposed to the spot market contract.
In this article, we’ll take a look at the fleet profiles for the major dry bulk companies. Depending on volume, trade routes, and the geographical limitations of ports, various classes of vessels are employed.
Major players in the dry bulk shipping space have taken a hard fall this year. SEA, an index weighted with dry bulk shipping companies, has lost 14.5% so far in 2015.
As a limited partnership, Navios Maritime Partners (NMM) tries to keep its distributions stable. Its ability to pay distributions came under increased pressure.…
The Baltic Dry Index is a leading indicator for the bulk shipping industry. It measures the cost of shipping major bulk commodities on a number of shipping routes.
In this series, we’ll discuss some of the important metrics that drive the dry bulk shipping industry. Investors can gain exposure to commodities through the SPDR S&P Metals and Mining ETF (XME).
Navios Holdings and Safe Bulkers have dividend yields of 6.4% and 1.3%, respectively. NMM has an attractive 17% dividend yield. DryShips and Diana haven’t paid dividends in a long time.
What are the future plans for companies in the dry bulk shipping space in the face of a current weak market scenario? Future plans for acquisitions or buybacks and capital deployment are significant drivers of future prospects.
For Diana Shipping, contract rollover is a near to medium-term risk. Among its Capesize fleet, almost all of the 12 contracts will expire within about a year and a half.
For 1Q15, Navios Maritime Partners reported daily vessel operating expenses of $5,107. This is very low compared to 1Q15 expenses per day for DryShips and Diana Shipping.
Major players in the dry bulk shipping space have taken a hard fall this year. China’s appetite for iron ore and coal has waned, driving the current oversupply in the market.
Based on shipping companies’ fixed operating expenses, we can estimate that current time-charter rates shouldn’t go down much further. We’re witnessing pretty much the floor at prevailing rates.
Navio Maritime Partners’ lower daily vessel operating expenses suggest that a larger share of revenue will be distributed to investors and the general partner.
If the orderbook level continues to fall more from this point and demand continues to grow, we could see some life in dry bulk shipping rates and equities.
Dry bulk shipping got a major boost from China’s increased appetite for iron ore and coal almost eight years ago. Large ship orders are driving the current oversupply.
Diana Shipping’s investment strategy is to preserve the strength and integrity of its balance sheet and gradually increase its leverage as asset values weaken.
According to Diana Shipping’s (DSX) management, world crude steel production reached 1.66 billion metric tons in 2014. It was up by 1.2% compared to 2013.
DryShips (DRYS) commented that its total dry bulk fleet’s compound annual growth rate for 2005 to 2014 stood at 9.1%. Its fleet increased by 4.4% in 2014.
History reveals that increases in world GDP growth generally led to increases in marine transportation rates. Since June 2014, crude oil prices fell 50%.
Navios Holdings has a strong balance sheet. It has low leverage levels and a healthy cash balance. As of December 31, 2014, the company recorded $250 million in cash.
Navios Maritime Holdings (NM) is a global seaborne shipping and logistics company. It’s focused on the transport and transshipment of dry bulk commodities.
To date in 2015, the Guggenheim Shipping ETF, an index weighted with dry bulk shipping companies, increased 1.3%, while the Baltic Dry Index declined 28.3%.
Despite a fall in the crude oil prices, tanker firms are looking to raise capital through the US markets. Crude prices recorded a dip of 46.8% in 2014.
For 2014, the total coal imports were 291.22 million tonnes—compared to 327.1 million tonnes in 2013. This was after many years of double-digit growth.
The National Bureau of Statistics revealed that the December crude steel output in China increased 7.6% to 68.09 million tonnes. Steel output was up 1.5% YoY.
On a weekly basis, vessel prices indicate the current trading prices of Capesize, Panamax, Supramax, and Handymax vessels. They also indicate the weekly changes.
China accounts for a major share of dry bulk commodities’ imports and exports. In the past three months, the Guggenheim Shipping ETF (SEA) dropped 6.1%.
Despite a decline in fuel prices, the Baltic Dry Index has recorded an approximate 40% drop since the start of November and a 62% decline year-to-date.
Looking ahead, many factors are likely to positively influence the shipping market and the companies that play in it. For example, India’s increasing appetite for coal has caused Capesize and Panamax rates to surge by 94% and 49%, respectively.
Orderbooks of Suezmax and Aframax fleets remain at manageable levels, with the majority of new orders due for delivery in the second half of 2016 or later.
George Economou, the company’s chairman, president, and chief executive officer, purchased $80 million, or 57.1 million shares of common stock at the public offering price. With this purchase, Economou increased his ownership in DryShips to 16.9%.
DryShips notes that it has significant leverage in the dry bulk and tanker spot markets. So, positive developments in these sectors will result in substantial cash flow to its bottom line.
China is the world’s top iron ore and coal consumer. China imports almost 60% of the world’s seaborne iron ore, while its coal trade accounts for almost a quarter of the global trade.
China’s crude steel production is a key indicator that dry bulk shipping investors should watch. This is mainly due to iron ore primarily being used to manufacture steel.
Ship orders’ importance Orderbook is an indicator that investors can track for the longer run, as dry bulk ships generally take one or two years to construct. Managers’ expectations of future supply and demand differences reflect in the number of ships they order. Rising and falling ship orders indicate the different market scenarios. When managers refrain from purchasing […]
Growing construction activity in the global arena leads to significant demand for iron ore and coking coal, which expands the seaborne trade of these dry bulk commodities.
Coal trade saw significant changes over the past few years. China was a net coal exporter in 2009—only five years ago. Today, it’s the world’s largest importer.
