glenwpeterson

Dry Bulk Shipping Valuations Approach “Bubble” Proportions

I thought I would return to Mr. Gill related to his comments back in July about the Shipping stocks being in a bubble. At this point, I'd say we are a lot closer than we were in July. But if you were short shipping stocks when Mr. Gill wrote this article, you would have been torched. The BDI is well over 10,000. DRYS, EXM and others are leveraged directly to next years rates as in the case of the former, over 90% of it's ships will be rechartered into this high rate environment which is taking shape for 2008.

I made a note on my calendar to remind myself to comeback to Mr. Gill and ask him what went wrong with his analysis.

But, to frank, this is all rather tongue in cheek. I know what went wrong.

1. China GDP is still surging.
2. India GDP is still surging.
3. Brazil GDP is still surging.
4. China is a net importer of coal now.
5. Incremental Drybulk supply is being sucked up by Chinese intra-coastal trade. So, while the supply numbers show these ships as available, they are not.
6. China and Indian demand for steel are increasing at rapid rates as evidenced by higher and higher prices for iron ore, as well as a return to high rates for met coal.
7. Australian drought means Asia will have to seek grain from North and South American lengthening ton miles in the sector. The same can be said for India's protection of iron ore exports. That's making China go to Brazil.

The order book doesn't look to turn unitl 2009-2010 time frame.

Until then, I'd suggest you close your shorts out, for the time being.
Yes there is still more room to run......

I hate to say it....but I told ya so.....!

GWP