What is Dry Bulk Shipping Anyhow?

Dry bulk shipping for some reason sounds awkward to me. It is exactly what it states, but I don't get the feel of what they really are. I think its just too wordy. In writing papers and in life, conciseness makes everything simpler.

Commodities shipping. That will be its new name. Dry bulk shipping is basically the shipping industry for commodities. And in the past year there has been a huge bull market around it. And.... I should stop there, right?

When we realize that dry bulk shipping = commodities shipping it is much easier to understand why the industry is soaring. China needs stuff to build with. So does India. So does every other emerging market. Developing nations need commodities to develop an infrastructure. And coincidentally, the dry bulk shipping industry is the infrastructure to bring them such necessities as steel and coal and whatever else most people in the US don't really care about. So as BRIC (Brazil, Russia, India, China) grow exponentially they will all need to ship more and more commodities.

The key is that the global growth is happening faster than ships are being built. More bulk to ship with a fixed number of ships and (again classic supply and demand coms into play) dry bulk shippers get to charge more for their services. You would proclaim me a genius if this was March, but sadly rates have been rising steadily for the past year. In effect, fueling the huge bull market. In the recent September-October rally we saw dry bulk shippers jump like they were tech stocks. An iphone they are not! Shipping rates unexpectedly dropped in October and we have seen prices come crashing down.

To the 50day we go! Nothing is more beautiful than a stock crashing 33% to its 50-day moving average and holding steady. Diana Shipping (DSX) and DryShips Inc. (DRYS) are both at their 50 day averages after taking huge plunges (which were helped along by the recent corrections) . I see both of these stocks consolidating ( 85-98 for DRYS and 30-34 for DSX) before we can resume an uptrend. Which is perfect for options traders and investors alike!


An interesting bearish note is that EXM (Excel Maritame Carriers) recently released their 3qtr earnings and despite all the rate hikes they failed to beat analyst estimates. Yet after earnings Cantor Fitzgerald says:

"Analysts at Cantor Fitzgerald reiterate their "buy" rating on Excel Maritime Carriers Ltd (ticker: EXM). The target price has been reduced from $84 to $73.... Excel Maritime Carriers continues to be well positioned to benefit in 2008 from an expected rise in dry bulk rate"

In my opinion this speaks volumes about the industry. Despite disappointing analysts, the view of the entire industry is so great that EXM which is trading at $46.36 right now is reiterated at a buy with a target price of $73. So in that regard, I would recommend a strong performer like DSX. DSX just beat estimates with 78cents vs 45cents expected. And at the current levels the chart is not very extended at all holding its 50day and a trendline support. Also, analysts have upped their future estimates on DSX and still the stock can't escape the fear in the market... for now.


Unless the global economy comes to a standstill, the dry bulk shipping industry is strong. Not only are these stocks attractive for their growth, but they pay pretty hefty dividends compared to other "growth" stocks. Diana is supposed to give a $0.58/share dividend on Nov 27 (according to Fidelity) and at the current price of 30.73 that is 2% ish.

Forbes article on the recent drop in shipping rates (note the date): http://www.forbes.com/2007/10/30/drybulk-shipping-diana-markets-equity-cx_ra_1030markets41.html