NEW YORK (TheStreet) - Dry-bulk shipping rates tumbled in the last half of January, at one point falling to about $30,000 a day for capesize ships on the spot market.
Some attributed the fortnight of January weakening --
after what had been a healthy fourth quarter for the dry trade
-- to a falloff in the price of Chinese steel. Declining steel prices give mining companies and other charterers the power to negotiate lower freight costs with ship owners.
This week, though, rates have rebounded some. According to London's Baltic Exchange, the going rate for a capesize vessel on the spot market recently was about $30,700.
Anything below $20,000 a day for a capesize vessel, the largest bulk carriers plying the oceans, and investors start to worry about whether any profit at all will fall to the bottom line of these companies --
including the five we've highlighted
in our fourth-quarter look-back/first-quarter preview:
Genco Shipping & Trading
Navios Maritime Holdings
Divining future shipping rates is, of course, the great game of the industry. The latest trading in the derivatives called forward-freight agreements, or FFAs, indicates an average daily rate of $34,000 for capesize ships in March, $35,000 in June and $35,500 in the second quarter. (Often used as hedging instruments by ship owners and other industry insiders, FFAs are thought to signal where the smart money believes rates are headed.)
Meanwhile, many analysts are predicting average capesize rates of between $40,000 a day and $45,000 for all of 2010. That's the bulls' view. Some bearish observers think the number could go below $30,000 -- which wouldn't do much for profits and likely nothing for dry-bulk shipping stocks.
With this in mind, we ask readers of
to divine the direction of the spot market: What level will capesize rates average during the first quarter of 2010?
Take the poll below, to learn the consensus of
. And feel free to leave a comment -- because, after all, the dry-bulk world could use whatever clarity and insight it can get.
-- Written by Scott Eden in New York
>>Dry-Bulk Shipping: All Eyes on Horizon
>>Five Dry-Bulk Stocks to Watch
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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.