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Dry Bulk Shippers Continue Deep Slide

NEW YORK (TheStreet) -- Dry-bulk shipping rates continued their long march lower Monday, as a glut of new ships and weak bookings weighed on the industry, with no end in sight.

According to the Baltic Exchange, the London ship broker that tracks shipping rates on the spot market, the average fee for a capesize vessel (the largest dry-cargo freighters in existence) has fallen to a little less than $8,700 a day.

To put that in perspective, exactly a year ago, the same ships were fetching just shy of $40,000 a day. And during the height of the boom era, before the financial crisis, spot-market day rates surmounted $100,000 for a capesize vessel.

Even worse, with each decline on the spot market, ship owners are approaching the dreaded breakeven point. To operate a capesize vessel, it costs between $7,000 and $10,000 a day.

>>Dry Bulk 2011: Working Through the Glut

Already, then, some owners are feeling serious pain -- though, as dry-bulk industry analyst Jeffrey Landsberg points out, some routes in the world are seeing capesizes booked at $21,000 a day. (The Europe to Far East route, for example.)

Also, most publicly traded dry-bulk companies hire out their ships into long-term contracts, which carry set rates. Thus, operators are insulated to some degree from spot-market volatility. But if rates remain weak for the foreseeable future -- as many industry observers predict -- long-term contracts will come to an end, forcing companies into inking fresh contracts at near the going market rate.

That's bad news, especially for ship owners with large amounts of debt to service -- debt taken on to acquire the ships that brought on the glut to begin with.

Dry-bulk shares were unsurprisingly in the red Monday, even as the broader equities markets rose on bullish economic news.

Indeed, that's been the striking feature of the dry-bulk bust of 2010. Even as the global economy recovers, even as the commodities markets have boomed, shippers of those very commodities haven't benefited -- all because they binged hard so hard during the heady boom times between 2006 and 2008. More than 200 Capesize ships are slated for delivery this year.

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