Three Reasons to Bet on the Shipping Sector

Thermal coal is used in power plants, whereas metallic coal, of which China is already a net importer, is used to create steel.

The Earthquake Problem

The terrible earthquake earlier this month, which has so far left more than 50,000 dead and many more homeless in China, has disrupted the economy in ways that will benefit the bulk freight carriers.

The internal infrastructure is so broken that trains can't be used to haul freight around the country, explains Natasha Boyden, managing director of shipping research at Cantor Fitzgerald in New York. Instead, coastal ships are being used to move materials around.

One way or another, that puts upward pressure on the cost of renting all dry-cargo ships, including the very large ocean-going ones.

Second, it's been clear that much of the building work previously carried out in the quake zone was shoddy. China will now need to rebuild. To do that, massive quantities of cement and steel will be needed to make reinforced concrete for quake-proof buildings.

And all that material will need to be hauled across the ocean in dry-bulk carriers.

The Credit Crunch

As if all that weren't enough, there is also the credit crunch. Some U.S. government officials might be saying that the worst of it is behind us, but try telling that to anyone wanting to purchase a dry bulk ship.

Not only is it hard for the buyers to find financing, but the shipyards themselves are finding it hard to stay afloat, says Cantor's Boyden.