Danaos Corp (DAC)

[PinewoodsBear]

One reason why DAC might be down..

At a recent conference for the overall shipping industry the container ship sector was singled out to be more bearish than the dry bulk or tankers. Reason given was that too many owners had gotten on the band wagon all at once and ordered too many ships and unlike the dry bulkers who get some help by a predicted increase in demand and dayrates along with older ships getting scraped ... not many container ships are scheduled to be scrapped due to the newness of the current fleet just at a time the demand is weakening. One of the analyst speaking said that they expect only 50% of the fleet will be utilized in 2010-12 ( now does not that seem to be a bit shocking?) and he did not see any recovery until 2015. He noted the many long term contracts being broken and walked away from or rewritten at lower rates. Of course this is only one man's opinion but a respected analyst within the industry. Noted that day DAC and SSW dipped when the news hit the wires. Once again the debt levels of all these firms have to be considered in this light.
Certainly puts the dividends at risk of being cut back.

Less you think I am just doom and gloom here, you would be wrong. I like DAC in this sector and have traded in and out of it over the last two years and it has made me some nice profits along the way... but this is a time of realistic and steely eyed assessment of this industry. Its day will return again but for now it is rough sailing with more bad news to come... if this analyst is only half right. DAC being a tad bigger than SSW at the moment has the opportunity to buy out some of the poorer financed competitors or pick up some ships on the cheap... the only problem is that this trend could be hurting both big and small shippers at the moment.

So far the China--USA---worldwide trade-- has fallen off dramatically much faster than anyone could foretold and now the recovery looks chancy and not assured in the near future. Personal opinion would be not to rush into the stocks even at these cheap prices until the recovery looks more definite.
When it does the bigger players like DAC will attract the investment dollars first.

***PinewoodsBear***