Sector Snap: Drybulk Shipping Stocks Fall

NEW YORK (AP) — Drybulk shipping stocks fell Monday, as a key index slumped and a Morgan Stanley analyst said an oversupply of ships is overshadowing improving demand.

The Baltic Dry Index, which is run by the Baltic Exchange in London, fell 38 points Monday to close at 2,318. The index measures shipping rates on 40 routes throughout the world.

Morgan Stanley analyst Ole Slorer cut his view of commodity shipping, which includes the transport of dry goods as well as petroleum, to "In-Line" from "Attractive."

He thinks drybulk stocks will struggle over the next two years as more ships are being built. And since rates were "artificially inflated" this year because of port congestion and other factors, stocks are now too expensive.

"While the impressive recovery in dry bulk markedly lifted rates and values in 2009, it also resulted in a near-halt in scrapping and less incentive to cancel newbuildings from a total orderbook that currently stands at 65 percent of the fleet," Slorer wrote. "In the context of this outlook, dry bulk equity valuation is also starting to look stretched, in our view."