Is It Time To Start Trading Dry Shipping Stocks?

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Includes: BALT, DRYS, DSX, GOGL, NM, NMM, SB, SBLK
by: The Specialist

Summary

Dry Shipping stocks as a group had a good performance last week.

There may be a light at the end of the dark dry shipping tunnel.

Look for "surprise" spikes in rates later this year.

If you've been following my weekly articles on dry shipping you know I've been very pessimistic overall in the fundamentals despite glimpses of hope here and there. However, that's the long term picture and I'm always looking for possible short-term opportunities to make temporary trades.

Last week most of the shipping stocks I follow were, dare I say, "looking healthy" in the way they traded along with the market overall. As a basket, I envy those who were in names last week such as DryShips (NASDAQ:DRYS), Diana Shipping (NYSE:DSX), Navios Maritime Partners (NYSE:NMM), Safe Bulkers (NYSE:SB), Star Bulk Carriers (NASDAQ:SBLK), Baltic Trading Limited (NYSE:BALT), Golden Ocean Group Limited (NASDAQ:GOGL), and Navios Maritime Holdings (NYSE:NM) in totality.

On the all-important rate side, shipping rates certainly where responsible for the rally as most rates were flat or even down a bit.

However, a mistake many of us often make, including me, is to remember that we are still in the off season for the industry and not put too much emphasis on what is going on now as it's the latter half of the year that tells the tale. Often the time to buy dry shipping stocks is in anticipation of an upward swing in rates as the season heats up beginning as early as summer.

Despite the doom and gloom forecasts, including from yours truly, there may be a trade coming up.

According to Braemar ACM Shipbroking group research director Peter Malpas the fast-spaced scrapping within the industry during the first quarter continued to pick up steam for the month of March, helping to bring down the global glut of ships. Between the scrapping pace and lack of new orders for the Capesize ships, he sees basically no further growth in the Capesize supply for the rest of the year. This is the most important ship for iron ore transportation and the ship that leads the way for the industry.

Both Berge Bulk Singapore CEO James Marshal and Noble Chartering head of freight Michael Nagler say to look for some possible "surprise" spikes later this year as some order imbalances possibly emerge. I'll throw one more wild card hat into the ring: There have been many times in dry shipping history when a sudden rate spike caught just about everybody off guard. I'm not saying now is necessarily the time to buy and gamble, but as we get closer to summer I will start to seriously reconsider positioning for some gamble trades.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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