Traders Cooperative

[Painterguy1]

Shipping Insight: DryBulk spot rates continue to weaken

After reaccelerating last week to new highs last Tuesday, the Baltic Dry Index has declined for the fifth consecutive session. The BDI dropped another 133 points in London to 10,647. All the components continue to roll over led by notable declined in Panamax rates that have declined nearly 14% from 10/30 highs. While down, Capesize rates continue to hover around highs of 16,256 indicating enduring demand for this class. Navios Marine (NM) operates the largest capesze fleet of 20 ships, followed by Diana Shipping (DSX) and DryShips (DRYS) with 6 respectively. Handysize Index remained roughly flat at 3,050 points...Click here for table of indices...For the tanker, Persian Gulf rates to Asia may continue to rise for the seventh consecutive day as vessel glut shrinks on strong regional demand. Asian refineries continue to boost imports. VLCCs rates to Asia (account for nearly half of total global demand for carrier) continue to strengthen. This is good news for Frontline (FRO), which operates the world's largest fleet of very large crude carriers. While drybulk fundamentals remain strong, stocks continue to follow the direction in spot rates that are likely to remain volatile for the near-term leaving stocks rangebound. Given near-trough expectations for the tankers, we continue to argue the risk/reward is much more attractive vs. drybulks at this point.