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Dry Bulk Comeback Could Be Huge Christmas Gift

NEW YORK ( TheStreet) -- As the market goes, so goes dry bulk shipping stocks.

Most major dry bulk carriers enjoyed an uptick Wednesday as the major U.S. indices spiked on news that the Federal Reserve and foreign central banks would increase global liquidity , but this could mean feast or famine, depending on when you jump into dry bulk for December.

One industry trader said he thinks dry bulk stocks for a couple of reasons will move higher as 2012 approaches.

"What is interesting in the space ... is that all shipping stocks have totally missed the rally. They are lagging behind by at least 30%," according to the trader, who spoke on the condition of anonymity. "So, eventually the comeback is going to be huge."

The source also said that China's loosening on Wednesday of its banks' reserve requirements will be a positive for 2012, which means that dry bulk stocks could experience an early, slight uptick in December from the news.

"All in all, I think they will be moving higher," according to the industry trader.

The Baltic Dry Index and Capesize rates have recently flattened due to increased steel stockpiles by Chinese steelmakers, after they crept up from mid-August to late October on Chinese iron ore demand.

"China steel production is still low; with that being said, they're still fixing a pretty firm amount of vessels to haul iron ore," Jeffrey Landsberg, Commodore Research dry bulk industry expert, said. Landsberg also said rates aren't increasing because there are still a large number of vessels being delivered.

There is some promise that a seasonal rise in thermal coal demand could result in a slight rise in rates for Supramax, Panamax and some Capesize vessels as December brings the winter weather.

But Natasha Boyden, shipping analyst at Cantor Fitzgerald, isn't as optimistic about the industry going into December due to macro-economic uncertainties.

"I think the big question is 'how sustainable are these rates?' because if you look at the forward curve it comes down pretty dramatically," Boyden said. "I think you have to look at the overall picture. ... You have, overall, global fears of a slowdown; you have the European debt crisis.
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