Investors have been flocking to individual stocks like DryShips ( DRYS) to capture the upswing of the shipping industry, but the Claymore/Delta Global Shipping Index ETF ( SEA) may provide a safer opportunity.As China's demand for steel continues to soar, investors are starting to move back into shipping. SEA is a good way to invest in this cyclical sector while minimizing the risks that come with picking individual shipping stocks. SEA tracks the Delta Global Shipping Index, which measures the performance of companies listed on global developed markets within the maritime shipping industry. SEA's portfolio includes dry bulk goods and the leasing and/or operating of tanker ships, container ships, specialty chemical ships and ships that transport liquefied natural gas or dry bulk goods.
The shipping industry has been driven recently by the demand for steel in China, met by giant ships ferrying the commodity from Australia and Brazil to China's shores. Rates for large Capesize ships jumped yesterday after 13 straight days of declines. Dry bulk shipping has been gaining momentum after being badly beaten down during the global economic crisis, and continued growth in China will undoubtedly help rates. The top 10 holdings in SEA include: Teekay LNG Partners ( TGP), Alexander & Baldwin ( AXB), General Maritime ( GMR), Compagnie Maritime ( CMB), Euronav ( EURN), Tsakos Energy Navigation ( TNP), Teekay Shipping ( TK), Ship Finance International ( SFL), Seaspan ( SSW) and Dampskibsselskabet Torm ( TORM). The most important ratio in the shipping industry is "bottoms" (the number of ships) to demand for transported goods. When there is more product than bottoms the rates go through the roof, and when there are more bottoms than cargo the rates go down to bare operating expenses. Shipping is the most direct way to move necessary items like oil and grain from one country to another, so while the industry may fluctuate in the short term, the long-term need for these companies is unwavering. SEA provides investors with a tool to access the shipping industry without having to take a chance on a single company or single type of ship -- a valuable vessel in a volatile industry.