Dry Bulk Stocks Fall On Worrisome Data

Dry bulk shares fall sharply on indications that recent optimism of a rebound is perhaps unfounded, including a drop in shipping futures and commodities prices.
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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

Bloomberg

.

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

DryShips

(DRYS) - Get Report

and

Diana Shipping

(DSX) - Get Report

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

(SBLK) - Get Report

had given up 4.5%,

Genco Shipping

(GNK) - Get Report

was down 5%, and

Safe Bulkers

(SB) - Get Report

was off 6%.

Navios Maritime Holdings

(NM) - Get Report

,

Excel Maritime

(EXM)

, and

Eagle Bulk

(EGLE) - Get Report

had all dropped by about 11%.

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