Visibility in dry bulk remains low despite recent market activity. Is this just a bear rally or the beginning of a sustainable recovery? Clearly those most heavily invested in ambitious asset expansion plans have been feeling pain lately and have the highest hopes.
Given the credit crunch last fall in the financial meltdown and problems with letters of credit, there has been a lot of inventory drawing. The Chinese had build up their coal and iron ore inventories last year and have been actively in price negotiations with key commodity suppliers for lower prices. This has finally led to replenishment and cargo movement in the dry bulk sector.
Longer term it remains difficult to forecast the timing and impact of various government's 'stimulus' plans, especially infrastructure projects, on the dry cargo market. Many feel that shipping rates will stay subdued.
The issue is how long the bear market will last. The longer this goes on, the more severe financial strain on dry bulk shipping companies and risks of contract defaults/renegotiations as well as defensive action from senior lenders.
The shrewdest players were those like Corbin Robertson, who partially cashed in their holdings in the sale of QMAR to EXM. The weakest are those who overexpanded with very high asset prices and leveraged up at rates beyond the capacity of the company free cash flow. This did not prove a sustainable strategy for creating shareholder value.
Dry bulk was always a speculative business. Presently it is ideal for for risk-loving investors fueled by hopes and volatility-loving day traders!
Given the credit crunch last fall in the financial meltdown and problems with letters of credit, there has been a lot of inventory drawing. The Chinese had build up their coal and iron ore inventories last year and have been actively in price negotiations with key commodity suppliers for lower prices. This has finally led to replenishment and cargo movement in the dry bulk sector.
Longer term it remains difficult to forecast the timing and impact of various government's 'stimulus' plans, especially infrastructure projects, on the dry cargo market. Many feel that shipping rates will stay subdued.
The issue is how long the bear market will last. The longer this goes on, the more severe financial strain on dry bulk shipping companies and risks of contract defaults/renegotiations as well as defensive action from senior lenders.
The shrewdest players were those like Corbin Robertson, who partially cashed in their holdings in the sale of QMAR to EXM. The weakest are those who overexpanded with very high asset prices and leveraged up at rates beyond the capacity of the company free cash flow. This did not prove a sustainable strategy for creating shareholder value.
Dry bulk was always a speculative business. Presently it is ideal for for risk-loving investors fueled by hopes and volatility-loving day traders!
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