Bunker fuel prices correlate with crude oil prices. On January 19, the average bunker fuel price was ~$357 per ton—compared to $361 per ton on January 12.
Brent crude oil prices were $44.4 per barrel to $46.9 per barrel in week 46. Crude oil prices impact crude oil demand, freight rates, and bunker fuel prices.
For the week ending October 21, 2016, the average bunker fuel price was $321–$324 per ton. Bunker fuel prices are 8% higher than the same period in 2015.
For the week ending October 14, 2016, the average bunker fuel price was $320–$327 per ton. Bunker fuel prices are 11% higher than the same period in 2015.
Bunker fuel prices, which represent the largest cost to run a ship, are correlated with crude oil prices. For the week ended June 17, 2016, the average bunker fuel price was $284–$295 per ton.
Crude oil (DBO) prices impact crude oil demand. In turn, this impacts freight rates and bunker fuel prices. Brent crude oil prices ranged from $38.70 per barrel to $41.10 per barrel for week ten.
China’s total exports fell by 25% in February 2016 on a year-over-year basis. Although China’s overall imports fell, its crude oil imports rose in February.
Though increased scrapping and minimal ordering activity could provide some relief on the supply side, the outlook for 2016 isn’t looking good for dry bulk.
Dry bulk shipping vessel values have fallen to very attractive prices, especially for secondhand vessels. But investors are still wary of the downside ahead.
Time charter rates for dry bulk vessels have fallen considerably over the last few months. Capesize one-year rates have fallen by 40% in the last three months to $7,750 per day.
Diana Shipping is proactively investing in vessels to take advantage of the current low point for vessel valuation, and it can most likely outlast a prolonged downturn. So its valuation appears more or less full.
Navios Maritime Partners (NMM) cut dividends by 52% in its 3Q15 results given the weak outlook for the dry bulk industry. But even after a cut, it’s boasting of a yield of 30%+.
Since the market isn’t showing encouraging signs of a significant pickup next year, dry bulk companies might need to weather a prolonged downturn and manage their liquidity prudently.
Scorpio Bulkers (SALT) has the lowest financial leverage with debt-to-assets of 31.8% and debt-to-equity of 42.6% as of September 30, 2015. But this doesn’t give the full picture.
Navios Maritime Partners (NMM) and Diana Shipping (DSX) have a chartering strategy to charter the bulk of their vessels for the long term, thus holding high fixed-rate exposure.
In the current scenario of a weak dry bulk market, companies with lower operating expenses are preferred, since pressure on revenues makes operating leverages work negatively.
Scorpio Bulkers held an IPO in December 2013 and started to focus on only newbuild fleet. That’s the reason it has the youngest dry bulk vessel fleet with an average age of just 0.4 years.
Depending on volume, trade routes, and the geographical limitations of ports, various classes of vessels in a fleet are employed. Capesize and Panamax are used primarily to transport iron ore, coal, and grains.
Looking at dry bulk dynamics, the Baltic Dry Index (or BDI) is holding near all-time lows as rates for the bulkers continue to slump. Current rates are lower than the breakeven costs for most owners.
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.
China’s iron ore imports in September were the highest level of 2015 at 86.1 million tons. This was a rise of 1.7% year-over-year and 16.2% month-over-month.
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.
The Yorkville High Income MLP ETF (YMLP) fell 1.5% in the week ended October 2. For context, the broad market SPDR S&P 500 ETF (SPY) rose 1.1%, and the Energy Select Sector SPDR ETF (XLE) rose 2.4%.
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.
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.
Though the Baltic Dry Index has improved in the last two months, industry experts still believe that oversupply and weak demand growth will keep the BDI down for another year or so.
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.
The BDI (Baltic Dry Index) is a leading indicator for the bulk shipping industry. It rose for nine consecutive days to reach a level of 779 on June 19.
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.
In 2014, Chinese iron ore imports were up 14% YoY. Domestic iron ore production only increased by 5%. There are planned expansions for global iron ore mines.
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.
On a weekly basis, vessel prices indicate the current trading prices of Capesize, Panamax, Supramax, and Handymax vessels. They also indicate the weekly changes.
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.
