Dry-Bulk Shipping: All Eyes on the Horizon

NEW YORK (TheStreet) -- The fourth quarter was kind to dry-bulk shipping companies.

With rates for their services reaching levels not seen since before the crash, dry bulkers will likely post strong profit and cash-flow numbers when they go public with their quarterly results later in February.

Indeed, for a brief moment in October, a few ship owners were lucky enough to book their capesize ships on the spot market for voyages paying $100,000 a day. Though six-figure rates were hardly the norm -- on average across the fourth quarter, capesize vessels scored day rates of about $45,000 on the spot market -- that's still well above the levels indicated by the hedging instruments used by the shipping industry. The derivatives known as forward-freight agreements, or FFAs, had called for average rates in the fourth period of about $35,000 a day.

More to the point: $45,000 is more than enough for profits to roll in at a fine pace for shipping companies. Anything above $50,000 is considered historically strong, and enough to drive stock prices higher.

Still, as all dry-bulk investors know, stocks prices in the sector rarely move one way or another based on earnings reports alone. Analysts for the most part have a clear view of how much money each company will make in a given three-month period, since publicly traded shipping outfits, more conservative than their privately held peers, rent out most of their vessels under long-term charter contracts at fixed rates. Private ship owners, ruled largely by magnates in Greece and Norway, are much freer to roll the dice on the spot market.