Shippers Cont'd

Since the Olympics in China, Dry Bulk rates have been hammered. A large part of this is due to the fact many factories were closed during the Olympics to cut down on pollution. This resulted in a lower demand of dry bulk shipping due to a lower supply of iron ore. The massive price collapse from the high of 11,793 on May 20 down to yesterday's close of 829, must be attributed more to a price bubble as many investors placed huge bets on the continued growth of China post Olympics.

From the recent earnings report, it is obvious it is not quite as bad as it seems as many shippers have reported record earnings even after their stocks have dropped 80% and returned to levels of three and four years ago. The reports are still record breaking because most shippers lock in their prices several quarters ahead of time. Meaning that the price drop in dry bulk shipping won't hit most of these stocks earnings until the later quarters of 2009. This is where the economic bailout in China could become very valuable to these stocks if it leads to a dry bulk rate turn around soon.

Many of these stocks are already representing huge yields such as GNK which is yielding over 20%. GNK has one of the best looking charts in the sector and I am wondering how long it takes before more value investors jump in to pick up these yields as the stocks rebound. By looking at the volume pattern alone you can see investors are already moving into this stock. It may be a bit early and I will remain patient but I expect the tide to turn very soon. I will post my buys as entry points arise.


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