Shares in the notoriously volatile dry-bulk shipping sector sold off sharply Wednesday on a variety of concerns that the recent rebound in demand for ocean-going transport is perhaps a bit chimerical.
For one thing, futures contracts indicated Wednesday that dry bulk shipping rates might be coming down after some solid recent gains. (Called "forward freight agreements," or FFAs, the contracts are similar to commodities futures and are used by shipping companies to help them hedge against declining rates.)
But perhaps even more worrisome for maritime investors: commodities prices posted their sharpest fall in a month and a half Wednesday -- and if commodities prices fall, so does worldwide demand to ship the stuff. One indicator, the Reuters/Jefferies CRB index, which measures pricing for energy, metals and crops, had fallen 2.4% Wednesday afternoon, according to
Lastly, investors may have simply been taking profits in the wake of a recent run-up in dry bulk stocks, which, of course, is related to the fluctuation in shipping rates.
On Wednesday morning, June FFA contracts on Capesize ships fell to $72,000 a day, losing $8,000 from the previous evening, according to a morning research note to investors by Omar Nokta, a shipping analyst with the boutique investment firm Dahlman Rose. The 2010 contracts, he continued, slipped to $27,000 a day from $30,000.
By the afternoon, prices seemed to have weakened even further, with Capesize FFA contracts falling by $15,000, according to Natasha Boyden, an analyst at Cantor Fitzgerald.
Bulk carrier stocks were feeling the pressure in afternoon trading Wednesday. Industry big boys
were down nearly 7% and 8%, respectively, falling to $7.33 and $16.35. Diana stock had shot up 30% over the last two weeks alone.
Among smaller players,
Star Bulk Carriers
had given up 4.5%,
was down 5%, and
was off 6%.
Navios Maritime Holdings
had all dropped by about 11%.
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