FreeSeas: Other Dry Bulkers Worry, Not Us

PIRAEUS, Greece (TheStreet) -- Some New York City ferry-boat operators do more business than the tiny dry-bulk shipper FreeSeas(FREE Quote), let alone its peers in the global freight trade, but the company nonetheless had some interesting things to say about the industry at large in its second-quarter earnings report, released Tuesday.

FreeSeas owns just nine ships, all of which are Handysize and Handymax vessels, two of the smallest classes of dry-bulk ship but also the most common in the world. (Handysizes range from 15,000 to 35,000 deadweight tons; Handymax from 35,000 to 60,000 -- miniscule when compared to the Capesize behemoths, some of which weigh in at more than 200,000 tons.)

Most of FreeSeas's peers in bulk shipping own Capesize vessels, which haul the world's iron ore to the world's steel mills, and thus play key roles in the global economy -- flush beneficiaries during the boom times, but gut-wrenched washouts when those booms go bust.

One of the worries darkening the industry's prospects of late has been a coming supply imbalance. During the most-recent boom period, in 2006 and 2007, optimistic dry-bulk shipping magnates took out high-yield loans in order to make down payments on new ship orders.

Now two years later, so many of those brand-new vessels, most of them Capesize, are about to slide down shipyard ramps -- Champagne across the bowsprit -- that many industry observers worry that this fresh supply will sink rates and any near-term prospect for full recovery in the dry-bulk trade. There have been many aggressors when it comes to fleet expansion, including all the usual suspects: DryShips(DRYS Quote), Eagle Bulk Shipping(EGLE Quote), Excel Maritime(EXM Quote) and Genco Shipping & Trading(GNK Quote), to name a few.