This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Lower Iron Ore Prices: Good for Dry Bulk?

Stocks in this article: DRYS DSX GNK BALT EXM EGLE

Day rates for Capesize ships on the spot market fell to $12,000, very close to the so-called "opex" level, the point at which a ship falls below breakeven. Since then, they've risen above $30,000 a day, according to the Baltic Exchange, a London ship broker, as booking activity has improved. Further, analysts say, iron ore inventories in China appear to have fallen.

Earlier this year, the big three iron ore miners and the steel industries of Asia and Europe (the two biggest markets for the high-quality iron ore mined in Australia and Brazil and shipped across oceans) agreed to move to a quarterly pricing contract from an annual one.

The new pricing regime has led to some interesting consequences. Steelmakers, for example, unhappy by the shift to shorter-term pricing though powerless to squelch it, quickly learned how to turn things at least a bit to their advantage.

For the miners, the average selling price of iron ore on the spot market during each quarter is used to help set the contract price for the next quarter. (Rio Tinto and Vale use a three-month average, BHP a one- and two-month average.)

Cleverly, some Chinese steelmakers seem to have decided to pull out of the market for nearly a month toward the end of the third period. Demand slackened and, sure enough, iron ore prices came down. This is seen as one of the reasons that dry-bulk rates cratered as well, of course. Now, for the fourth quarter, China's steelmakers will have wrested a lesser iron-ore contract price from its iron ore suppliers.

Volatility, therefore, appears to be the new world order. And, long term, many shipping pros continue to worry about oversupply: the impact of so many new ships scheduled for delivery from shipyards to shipowners in the next year.

>>Dry Bulk Shipping Execs Air Bullish Views

Dry bulk stocks tend to move as a block, though there are differences.

DryShips (DRYS), for example, has been bogged down by its foray into the deepwater oil-exploration equipment industry. Eagle Bulk Shipping (EGLE), for another example, runs a fleet of Supramax-size ships, which specialize in coal and grain hauling, not iron ore. Iron ore is mostly shipped on the enormous Capesize vessels. Thus, Eagle may not participate quite like other bulkers in a rise in day rates for Capesize ships.

2 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,806.40 +28.25 0.16%
S&P 500 2,074.67 +13.44 0.65%
NASDAQ 4,777.6440 +29.2480 0.62%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs