NEW YORK (TheStreet) -- Dry-bulk shipping concerns saw their U.S.-listed shares rise sharply again Monday as shipping rates continued to strengthen and a Deutsch Bank analyst raised the firm's rating on several stocks in the sector.
Day rates for dry-bulk services extended their recent run northward Monday on the back of Chinese demand for raw materials and worsening congestion at ports in Australia and China, with ships stacked up and waiting to unload or pick up their cargo. One analyst said that 132 capesize ships were at anchorage last week in the world's major ore and coal ports, up from 112 a month earlier, a situation that squeezes supply.
The Baltic Dry Index, which tracks the daily changes in spot rates for dry-bulk carriers, rose 2.7% Monday. Fees for capesize ships, the largest dry cargo vessels in the world, jumped 2% to $78,075, according to the Baltic Exchange, the London-based ship broker.
Also Monday, Deutsche Bank shipping analyst Justin Yagerman lifted his rating on three dry-bulk names:
Genco Shipping & Trading
"While we remain cautious on the sector over the long-term due to supply growth, we believe recent vessel dislocation stemming from seasonal coal and grain trades and continued strength in iron ore imports into China will likely continue to drive near-term upside in day rates and dry bulk stocks," Yagerman wrote in a research report.
The analyst noted that, although China remains "in the dry bulk driver's seat," increasing demand from Europe and Japan for iron ore and coal "has driven a significant portion of this upside." Heightened activity on trade routes to Europe and Japan, Yagerman said, have compelled owners to put ships to work there, pushing rates higher on the crucial Australia-China and Brazi-China iron ore routes.
As for China, the analyst sees steel production and iron-ore run rates continuing at the current pace until the first quarter of next year, "at which point we believe the threat of them backing away from the market becomes markedly higher." He added that average daily rates for capesize ships could approach $100,000, a level not seen since before the financial collapse.
That might not be as bold a call as it may seem. Capesize rates for the more expensive Brazil-to-China route recently pushed above $100,000 a day.
Yagerman said he chose to single out shares of Genco for an upgrade to buy because of the company's exposure to the spot market, and Euroseas for an upgrade to the same rating because its stock is trading at a 17% discount to its net asset value.
He lifted his rating on Eagle's stock to hold. The company had taken on a lot of leverage to build up its fleet, but the ongoing strength in dry-bulk rates "likely limits near term downside."
As with many shipping analysts, Yagerman's favorite pick in the sector remains
, which he rates a buy.
Genco shares led the group higher Monday, gaining more than 10% to $27.45. Eagle shares, meanwhile, added 9.8% to $5.94, and Euroseas rose 4.7% to $4.50.
Other leading advancers included shares of
, up 6.9% to $9.17;
, up 7.4% to $6.25; and
( TBSI), up 7.6% to $8.26.
The larger-cap names in the group were more subdued, with Diana's stock gained 3.6% to $16.89 and
adding 3.4% to $7.08.
-- Written by Scott Eden in New York
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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining TheStreet.com, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.