DryShips: Is The Bleeding Over?
Apr.20.17 | About: DryShips Inc. (DRYS) Get Alerts
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Summary
DryShips' precipitous decline has halted after the acquisition of new vessels.
However, the Baltic Dry Index is showing mixed performance.
DryShips looks unlikely to keep its recent gains because of liquidity challenges and weakening Capesize rates.
source
DryShips (NASDAQ:DRYS) has halted its precipitous decline after the acquisition of three Kamsarmax dry bulk vessels. This acquisition is a follow up on some of the purchases announced earlier in the month on April 3. However, these developments further strain the company's poor liquidity and are unsupported by the other variables that affect the stock price of the company, namely shipping rates.
Because DryShips' liquidity position remain risky, and the Baltic Dry Index's rally shows signs of stalling, recent positive movements in the stock look likely to correct downwards. The bright side is in Panamax daily rates, which are showing resilience in the face of the overall decline in the index.
Vessel Acquisitions
These purchases were first announced on the 3rd of April, but the purchase deal was contingent upon an inspection of the vessels. They were built in 2014 and have a DWT of over 80k. Kamsarmax vessels are generally larger than Panamax vessels and are associated with the Port of Kamsar in Guinea, West Africa. This is a major loading point for Bauxite, a material used in aluminum production.
As large vessels, the Capesize component of the Baltic Dry Index will probably be the best reflection of shipping demand for these sorts of vessels. Note the term "Capesize" refers to the Cape of Good Hope which is also located in Africa. The Capesize Index is, unfortunately, seeing signs of decline.
