Friday, August 15, 2008

Baltic Dry Index Stages Strong Rebound!

Two of Japan's main shippers, Mitsui O.S.K. Lines Ltd. and Nippon Yusen K.K, records hefty gains after the Baltic Dry Index broke its record of 24 consecutive days of decline!

Early Bloomberg News today:
Mitsui O.S.K., Nippon Yusen Lead Gains by Japanese Shippers

  • Nippon Yusen advanced as much as 5.6 percent to 908 yen and traded at 886 yen as of 10 a.m. on the Tokyo Stock Exchange today., Mitsui O.S.K., Japan's second-biggest shipping line, gained 5.4 percent to 1,302 yen and Kawasaki Kisen Kaisha Ltd., the third-largest, rose 5.2 percent to 772 yen.
  • ``The Baltic Index's rally sparked bargain hunting among investors,'' said Hiroichi Nishi, an equities manager at Nikko Cordial Securities Inc. in Tokyo. ``The shipping shares had been sold to the level where they had become attractive.''

And last night the index increased a whopping 323 points or 4.5%! WOW!

Before you get all gung ho on the BDI again, here's an interesting article, Dry Bulk Breaks Swan Dive

  • On Wednesday the Baltic Dry Index, which is managed by the Baltic Exchange in London and measures dry bulk shipping rates on 40 routes across the world, rose 1.8%, or 105 points, to 7,097--the first rise since July 10.

    Although any index falling for 24 straight days would be cause for alarm bells, the softening of the Baltic Dry Index in the summer months is nothing new. “Summer is when you normally start to see things slowing,” said Jefferies analyst Douglas J. Mavrinac, because of weather, port disruptions in India during the monsoon season, weakening steel consumption, and the downtime between the South American harvest season in the spring and the North American harvest season in the fall.

    But this year there is one more factor that compounded the weakness in shipping demand: the Olympics.

    Since July 23, China shut has idled some factories in the northeast to reduce air pollution during the Beijing Games, which has caused a significant slowing in industrial and construction activity, Mavrinac said.

    “All of these factors are temporary in nature,” said Mavrinac. “The seasonality, while it usually results in softening of Baltic Dry Index rates in the summer, typically reverses once we get into August,” when monsoon season is over, steel consumption tends to pick up, and Northern hemisphere harvests begin.

The article then continues.

  • The only question now is: Has the Baltic Dry Index already hit bottom or could it still move lower?

    “You have to believe that if you’re going to be buying into the sector that the slowdown we’ve seen in commodity prices is temporary in nature and the second half of the year you’ll see a rebound in industrial activity, especially in China post-Olympics,” said Mavrinac.

    Lazard Capital Markets analyst Urs Dur agrees. He expects the Baltic Dry Index to stabilize in the near term and then trend higher toward the end of September, bringing dry bulk stocks with it. “Increasing demand for the movement of steam coal, increased iron ore import demand, the seasonal grain trade, and a persistently tight supply of ships through the end of 2008 should put the BDI on an upward trend in the next 40-60 days, and we see the trend lasting into December,” he said.

    Dur advises that investors buy shares of dry bulk companies with “built-in growth, long-term contract cover, solid balance sheets, and top management” while they’re cheap in the near term. His suggestions: Genco Shipping & Trading, Eagle Bulk Shipping and Navios Maritime Holdings.


Do you think that the worse its over and that it's now a good time to go bargain hunting?

Blogged last Friday: Baltic Dry Index Keeps Falling!

See also previous update : Update of Baltic Dry Index and also older posting of interests: Goldman Downgrades Bulk Shippers! and The Collapse of the Baltic Dry Index


If you own a dry bulk shipping stock such as Maybulk, would you still HOLD the stock?

Would you even contemplate buying more now?

Or do you reckon and agree that global economy is weakening and slowing down? And if this is to be true, then shippers would be in less demand, yes?

Here's a good article posted on today's FinancialSense market wrap, Implications of the Slowing Global Economy