NEW YORK ( TheStreet) -- The dry-bulk shipping industry has suffered a topsy-turvy 2011 so far: gluts, floods, bankruptcies, collapsing freight rates, continued piracy, earthquakes. Throughout 2011, TheStreet will track major market-moving events in the dry-bulk shipping sector. Click on to view the year's biggest industry headlines so far this year. (Articles are reflective of the news at the time they were published.)

DryShips Sees Drill Rig IPO in 'Next Few Months'

May 16: DryShips ( DRYS), the controversial maritime shipping company that's been trying to build a deepwater oil-drilling business, said it obtained key long-term contracts for two of its drill rigs, allowing the company to spin off the unit in an IPO within the "next few months."

The company gave the update in its first-quarter earnings report after the market closed on Thursday, May 12.

The contracts, signed with Petrobras ( PZE) to explore for oil off the coast of Brazil, have a combined value of $1.1 billion, the company said. The contracts provide crucial financial support for an IPO spin-off of the drill-rig unit, called Ocean Rig, which DryShips has been planning -- and promising to sometimes skeptical investors -- since 2008.

Said DryShips' CEO George Economou in a statement: "These two contracts are the culmination of our efforts since we entered the drilling segment three years ago." He said Ocean Rig's backlog had doubled to $2 billion. The company has six drillships under contract. Two more vessels have been ordered from shipbuilding yards, scheduled for delivery in 2013.

According to DryShips in the earnings report, "During the next few months we plan to take active steps to monetize DryShips' most prized asset, its shares of Ocean Rig common stock, through a public listing in the U.S."

The move came as the dry-bulk shipping industry struggles through its worst market for freight rates since the darkest days of the financial crisis. This time, rates have collapsed because of a massive glut of new ships, ordered by shipowners when business was flush during the pre-crisis boom years.

DryShips' rig business has allowed the company to avoid some of the financial distress suffered by other publicly traded dry-bulk companies, many of which -- Eagle Bulk Shipping ( EGLE) and Excel Maritime ( EXM), for instance -- swung to losses in the first quarter.

That's below the value even of the company's Ocean Rig unit, according to the calculations of one hedge fund trader who specializes in merchant shipping equities, and who estimates DryShips' 80% ownership of Ocean Rig at $5 per share. The other 20% of Ocean Rig trades on the Oslo stock market.

Still, this trader said, "I think a lot of people are hesitant to give full value to the stock." He said that management decisions in the past -- which is to say CEO George Economou's decisions -- have given some investors pause when it comes to DryShips. Most recently, in December, the company made a surprise $750 million purchase of a fleet of oil tankers. The deal was announced after the market close on Dec. 23.

It's not the acquisition alone that concerns some investors, the trader said, but lack of transparency and communication. "It's the risk of waking up one day and seeing he's bought, I don't know, a port or something."

On the earnings front, DryShips reported a first-quarter profit of $25.8 million, or 7 cents a share, a 94% jump from the year-earlier period's $13.3 million, or 4 cents a share. Revenue rose 7% to $207.4 million from $194.2 million in the first period of 2010.

The increases came entirely from the company's drillships unit. Voyage revenue from dry-bulk shipping, which transports raw materials such as coal, iron ore and grain, dropped 14% to $98.1 million in the first quarter from $114 million a year earlier.



April 14: Paragon's Box Ships Sinks in Debut

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The second containership company to begin selling shares to the public in New York this year sank below its offer price when it debuted in trading April 14.

Called Box Ships ( TEU), the company is based in Athens, and it was founded by the founder of the small dry-bulk shipping concern, Paragon Shipping ( PRGN), which is also listed on the New York Stock Exchange.

The founder's name is Michael Bodouroglou. Like other shipping magnates -- George Economou of DryShips ( DRYS), Peter Georgiopoulos of Genco ( GNK) and General Maritime ( GMR) -- Bodouroglou has his hands in multiple shipping companies operating multiple vessel categories. In January, Diana Shipping ( DSX) -- founded by Simeon Palios -- also spun out a containership business, Diana Containerships ( DCIX).

On April 14, Box Ships' stock finished the regular session at $11.05. The company priced 11 million shares at $12 a share.

Diana Containerships, meanwhile, finished at $13 on April 14. It hasn't performed well since its debut, either, having started trading at $14 in January. (A different kind of transportation company had a better IPO experience on Thursday: Zipcar ( ZIP) priced at $18, above its expected range, and then soared during first-day trading to $28.)

For the uninitiated, dry-bulk ships haul raw materials such as iron ore or grain or coal. Containerships carry finished goods, stuff loaded high in their holds and on their decks inside those big steel boxes that can become semi trailers or railroad cars.

Thus, the containership business is closely linked to the health of the world's consumer economies, especially the U.S. and Europe. Dry bulk shipping is much more linked to the health of manufacturing and heavy industry.

One of the vicious ironies of the dry-bulk shipping business right now is that it hasn't been able to participate -- not since the end of last year, at least -- in an extraordinary boom in commodities driven in large part by China's continued hunger for raw materials to feed its explosively growing economy. That's because of a heinous glut: there are simply too many dry bulk ships either on the water or expected for delivery this year for current demand to soak up.

In light of all this, click on for a slideshow of all the major stories that have moved the dry-bulk sector this year...



March 31: DryShips Moves Closer to Rig IPO

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DryShips ( DRYS) shares rose after the company appeared to clear the final hurdle on its way to a long-awaited spinoff of its oil-rig business.

In its fourth-quarter earnings report, which the company had delayed for about a month, DryShips said it had secured financing for the last two new drill rigs out of four that it had ordered from shipyards. The company needed to find oil companies to charter the vessels before it could convince a bank to lend it the money to pay for them. DryShips got charters for three out of four of the drillships late last year -- good enough for the banks, evidently.

DryShips also said it was able to restructure an earlier loan it had received from Deutsche Bank ( DB).

The bank deal would seem to pave the way for DryShips to sell off its energy-exploration operation, called Ocean Rig, in a long-awaited initial public offering in the U.S., and will "go a long way in unlocking the value of DRYS," wrote Credit Suisse ( CS) analyst Greg Lewis in a note to clients Thursday morning.

Lewis has an outperform rating on DryShips shares with a price target of $9.

DryShips stopped short of offering a timeline for the Ocean Rig IPO. Said George Economou, the company's founder and chief executive, "We remain committed to registering the Ocean Rig shares on an exchange at the earliest and to build Ocean Rig into a competitive player in the ultra deepwater sector."

In what amounted to almost an afterthought, DryShips reported fourth-quarter results that missed expectations. Excluding items, DryShips had per-share earnings of 24 cents. The Wall Street consensus was targeting 26 cents. A year ago, the company posted earnings of 19 cents a share.

In January, DryShips took delivery of its first two oil tankers from a deal in December in which the company acquired 12 tanker newbuildings for $770 million.

In mid-March, one of DryShips' Panamax vessels ran aground off the coast of an isolated island in the middle of the South Atlantic. The ship sank, but fuel spilled from the wreck, coating a colony of endangered penguins on the island and sparking reports of environmental disaster. DryShips said in its press release that it has insurance to cover the wreck, but it didn't say whether it would face any further liability involving cleanup.

DryShips also said it had three vessels chartered to Korea Line Corp., the financially troubled shipping concern that entered receivership earlier this year. DryShips has shifted all three vessels to the spot market. Credit Suisse's Lewis believes the charter defaults will cost DryShips between $30 million and $35 million in 2011.



March 25: Eagle Bulk Reworks Charter Pacts With Troubled KLC

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Eagle Bulk Shipping ( EGLE) said on March 25 that it had reworked a series of charter agreements with one of its main customers, Korea Line Corp., a troubled shipper that was forced to enter receivership earlier this year as rates for dry-bulk services collapsed amid an oversupply of new vessels entering the market.

Under the new pacts, KLC will charter ten of Eagle's ships at $17,000 a day for each of those vessels. That's down from about $18,400 a day under the original charter agreements. The average going rate on the spot market for those types of ships, known as Supramaxes, stood at about $16,700 a day as of Mach 25, according to the Baltic Exchange, a London ship broker that tracks ocean-going freight rates around the world. The market remains depressed; a year ago, Supramax vessels were fetching a little more than $34,000 on the spot market.

Eagle said that two "newbuildings," or ships currently under construction at shipyards and expected for delivery later this year, will be also be chartered to KLC for $17,000 a day. One other ship didn't see a change in its charter agreement with KLC. Under that agreement, Eagle receives $18,300 a day.

When KLC's bankruptcy first came to light in late January, investors feared that Eagle would be exposed to significant counter-party losses. Eagle's stock was trading at more than $5 before the news emerged. It has yet to recover, finishing the March 25 session at $3.93, up 2%.

In mid-February, KLC announced that it would enter "rehabilitation protection" under a South Korean court.

Dry bulk rates on the spot market at the time of the pact had recovered some since cratering earlier in the year. According to the Baltic Exchange, the average daily fee for a Capesize ship, the largest dry-bulk freighters in the world, rose to $10,700 on March 25. In February, rates for the same vessels were averaging about $5,000 a day.



March 15: Japan Nuke Fears Hit Commodities Stocks

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Selling pressure hit commodities-linked stocks Tuesday, March 15, as Japanese markets crashed amid the burgeoning post-quake nuclear crisis.

The downward pressure was general, with the Dow Jones Industrial Average tumbling more than 200 points, but the declines among commodities names were among the most severe no matter the sector. Institutional investors that had pushed commodities prices to near record highs in recent weeks are using the ugly headlines scrolling across the tapes as an excuse to rotate out of commodities and equities, say market participants.

"We're seeing investment money just bailing out of commodities," said Darin Newsom, senior commodities analyst at DTN in Baltimore. "We had seen that trend in grains for the last two weeks or so, but now we're seeing it in metals, in energies, in everything."

The worst hit sector of commodities-linked stocks was probably dry-bulk shipping, where fears percolated that the closing of so many Japanese ports because of the tsunami will impair demand for oceangoing freight services in the near term.

That reduction in demand couldn't come at a worse time for dry-bulk ship owners, who have faced a collapse in rates since the beginning of the year as a glut of new ships weighs on the market.

Among stocks in the sector, DryShips ( DRYS) shares declined 3.4%, Diana Shipping ( DSX) 4.5%, Genco Shipping & Trading ( GNK) 5% and Excel Maritime ( EXM) 6.3%.

Feb. 24: Dry-Bulk Companies Report Mixed Fourth-Quarter Results; Outlook Stormy

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Genco Shipping & Trading, which has more of its fleet exposed to the depressed spot market than any of its peers, missed Wall Street expectations for its fourth quarter when it reported on Feb. 23, but its stock spiked higher by nearly 7% in the subsequent trading day.

According to one analyst who participated in the company's conference call to discuss fourth-quarter results, Genco management did a good job ameliorating investors and analysts by indicating that the company will generate substantial cash this year, despite a severe decline in rates for the largest dry-bulk ships.

Genco shares have been heavily shorted. As of Jan. 31, short positions amounted to 17.5% of its float, the highest of any dry-bulk shipper. Short covering may partly have explained the severity of the share price rise after the company's conference call.

Genco also said it would stick to its current strategy of engaging its ships under short-term contracts in hopes of a rebound in the market for ocean-going commodities transport. On the spot market, dry-bulk freight rates have been severely depressed since the beginning of the year.

The company's results marked a mixed earnings season for the dry-bulk trade.

Genco rival Diana Shipping ( DSX) reported a 17% rise in profit from a year ago, but the company offered little in the way of outlook as the dry bulk industry faces one of its worst markets in years.

Beyond the numbers, analysts continued praising the conservative Diana and its long-range strategy. Credit Suisse analyst Greg Lewis said in a note to clients Feb. 22 that the company would use the downtrodden market for dry-bulk ships to expand its fleet by buying up vessels on the cheap.

Meanwhile, Excel Maritime ( EXM) appeared to meet Wall Street estimates for its fourth quarter, but its stock slid sharply after the results were released.

Excel tried to reassure investors that an industry-wide glut of newly delivered dry-bulk vessels, which has served to depress spot-market shipping rates so far this year, wouldn't sting its bottom line.

"While we expect that deliveries of new vessels in 2011 will cause some volatility in freight rates, we remain cautiously optimistic in the dry bulk market outlook based on emerging markets being the principal drivers of growth," said Excel's Chief Financial Officer Pavlos Kanellopoulos in a prepared statement.

Feb. 23: China Steel Data Portends Slowdown?

The Maanshan Iron & Steel Co. blast furnace, near Nanjing, China.

China's steelmaking industry, so tightly linked to the share-price valuations of dry-bulk shipping lines, transmitted a few worrisome signals in late February, at least according to some observers.

At issue was the amount of iron ore that has accumulated in stockpiles at Chinese ports over the last few months. The total amount reached 80 million metric tons that week -- near an all-time record -- according to Jeffrey Landsberg, an independent analyst and data cruncher who specializes in studying the dry-bulk shipping trade.

On the output end of China's blast furnaces, stockpiles of flat steel and products used in construction had also steadily expanded over the prior two months, swelling to 15.4 million tons, up 18% since Dec. 31 alone.

Landsberg, who gathers his numbers from steel-industry sources in China for his own research shop, Commodore Research, pointed all this out, at the time, in a report. Increasing supplies of iron ore at the ports, where it awaits shipment to steelmakers, along with rising inventories of completed steel, would likely lead to a short-term drop in iron ore demand over the next few weeks, Landsberg wrote.

When it comes to the dry-bulk shipping trade, especially those companies that charter the humongous Capesize ships that specialize in iron-ore transport, "the expected slowdown could not come at a worse time," Landsberg said.

Indeed, a well-documented glut of newly delivered dry-bulk vessels had led to a collapse in shipping rates. The going daily rate for a Capesize ship on the spot market had hovered around $6,000 for weeks, well below the amount it costs to operate such vessels, estimated at between $7,000 and $10,000 a day.

Landsberg, for his part, didn't believe that the most-recent stockpile data prefigured any kind of doomsday scenario: that the fast-growing Chinese economy would have a dreaded "hard landing" due to the inflation-curbing moves put in place by the country's authorities.

In an email, Landsberg told TheStreet, "That said, the stockpiles need to be monitored closely -- and could end up being an early sign of something more substantial brewing in China, but I don't think so... I think the Chinese economy will continue to expand rapidly but we shall see."

Other observers of raw materials markets were optimistic. "We've seen iron-ore pricing remain firm. That's a good indicator," says Anthony Rizzuto, the metals and mining equities analyst at Dahlman Rose in New York. The analyst said that the bump in stockpile amounts likely occurred as a kind of natural move by iron ore buyers ahead of the Lunar New Year holiday in China. He said that Chinese consumer demand remains strong, which will buttress steel production.

Jan. 25: Korea Bankruptcy Slams Dry-Bulk Stocks

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When a big South Korean ocean-freight company entered receivership in late January, dry-bulk shipping stocks plunged across the board.

By far the most exposed to the struggles of Korea Line Corp. was Eagle Bulk Shipping ( EGLE) whose stock fell more than 11% on the day the receivership came to light.

According to one hedge-fund trader who focuses on shipping stocks, Korea Line had chartered 13 of Eagle Bulk's 48 ships. The charters are long term, lasting between six and ten years. That gave Eagle Bulk about $700 million in exposure to Korea Line, according to the calculations of the trader.

The company later disputed that figure. In a statement, Eagle called its exposure "modest," saying that "the vast majority of our charters with KLC are fixed at close to current market rates." A spokesman for Eagle called the $700 million figure "rather dramatic."

Some investors feared that the bankruptcy of one of Eagle's most important customers could trigger breaches in its own loan covenants. Eagle hads about $1.1 billion in debt, at the time, which was about the same as the value of the company's fleet, according to the shipping-equities trader.

In a bit of cruel irony, Eagle at one point held insurance for just this situation -- i.e., to cover losses associated with the default of a charterer -- but the company decided to let that insurance expire last year, the trader said.

Two weeks later, when Eagle reported fourth-quarter earnings, the company said it had moved all the ships previously chartered to KLC into short-term fixtures at spot-market rates with other companies. Eagle said it was able to obtain a daily fee of about $15,000 for each vessel. Had Eagle not done so, the ships it had chartered to Korea Lines would have gone out of service while the troubled outfit worked through its receivership.

Since late January, just before the KLC news broke, Eagle shares had traded flat, at about $4.

Jan. 21: Aussie Coal Mining Washed Out by Floods

Floodwaters in the town of Rockhampton, in Queenlsand, Australia, early January 2011.

The floods that ravaged Queensland, Australia, reduced the country's coal exports by 15 million metric tons in the first quarter, or 20%, according to a report released by the Australian government on Jan. 21.

Starting in late December, monsoon rains caused some of the worst flooding Down Under in more than a century. The deluge struck the northeastern part of the island nation, in the state of Queensland.

The flood study, put out by the Australian Bureau of Agriculture and Resource Economics, said diminished coal exports could cost the mining industry as much as $2.5 billion. But the decline in global supply caused by the floods would likely push prices higher, "partially offsetting the adverse impact on coal industry revenues," the report said.

The dropoff in exports was caused not just by mines that had to be closed, the report said. Damaged railroads and seaports, disruptions in obtaining mining supplies, and a diminished workforce cutoff from the mines by rising waters all had contributed to the overall decline.

Queensland's mining districts, especially a region called Bowen Basin, account for more than half of the coal mined in Australia, which is itself the world's biggest exporter of the fossil fuel. Most of the companies operating mines in Bowen Basin, including BHP Billiton ( BHP), Rio Tinto ( RIO), Vale ( VALE), Anglo-American and Peabody Energy ( BTU), were compelled to declare force majeure, a legal clause in a supply contract that says a company can't be held responsible -- or pay penalties -- on late shipments to customers because of problems caused by events outside its control.

"If the disruption is very severe, there is a chance that iron ore importers would eventually need to source more iron ore from Brazil, India and other exporters," wrote Jeffrey Landsberg, a dry-bulk shipping analyst and founder of the firm Commodore Research.

Most of Australia's iron ore and coal go to China, which, as it happens, just recorded an all-time record amount of coal imports in December, taking in 17.3 million tons and topping the previous high of 16.4 million, set exactly a year earlier, in December 2009.

Jan. 13: DryBulk Rates Collapse Amid Glut

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The volatility dried up. The trading volumes plunged. The money fled.

A fleet of formerly high-beta dry-bulk shipping stocks entered the doldrums in mid-January. From DryShips ( DRYS) to Excel Maritime ( EXM) to Eagle Bulk Shipping ( EGLE) to Genco Shipping & Trading ( GNK), maritime transporters of dry cargoes such as iron ore, coal and grain had seen investors decamp from the sector over the previous year, even as demand and prices for those commodities had themselves surged.

The irony was not lost on those involved in the trade.

"Nobody cares about shipping," said one hedge-fund manager, dejectedly. A native of Greece, he specializes in trading maritime equities. "It's like a forgotten industry. Nobody wants to touch it. It's actually kind of worrisome."

It was easy to see why. Back in the boom times of 2007 and 2008, ship owners were flush with cash as demand for raw materials exploded (especially from China). Borrowing costs, meanwhile, fell to historic lows. And, seduced once again by all that easy money, shipping executives behaved like U.S. homebuyers and binged at the shipyard, ordering thousands of new ships. It's an ancient story -- the cycle of the shipping industry. "Owners always do this," says Jeffrey Landsberg, who runs the dry-bulk analytics shop Commodore Research, in New York.

The craze was especially vigorous among Capesize vessels, the largest dry bulkers on the high seas.That's because "Capes" (as they're called by insiders), are the hauler of choice for iron ore, and -- in good times at least -- service the most lucrative cargoes and routes, because they're responsible for feeding China's dynamically growing steelmaking industry.

By almost all accounts, the glut has arrived. Last year, about 210 new Capes were delivered. By comparison, 115 emerged from shipyards in 2009. In the several years before that, the annual number of new Capes came to between 40 and 60. Since 2009, the global Capesize fleet has grown by 18%.

The rates at which iron-ore miners hire out Capesize ships slowly eased lower throughout 2010, a decline that sharpened in the final months of the year, moving from about $40,000 per day in early November to $20,000 as of Jan. 3.

Then, in the following week, the cliff head was reached. The going charter price for a Capesize vessel on the spot market plunged by 50% over the space of a few days, as judged by the Baltic Exchange, a London ship broker that tracks maritime freight rates. Rates as of Tuesday, Jan. 11, were less than $12,000 a day -- very close to the amount it takes to operate a Capesize ship, and the lowest since early 2009, in the midst of the financial crisis.

Of course, epochal floods in Australia's Queensland state had disrupted mining in one of the world's most prolific coal fields, which has hurt the dry-bulk trade at large. But coal is mostly carried by smaller Panamax and Supramax ships, not Capes. Indeed, the glut in the latter class of vessel had been so strong that Capes were the cheapest dry bulk carriers to rent on the spot market except one: the Handysize, which are one-tenth as big as Capes.

Another 200 Capes were scheduled for delivery across the year -- which isn't good, not by any means. Still, most publicly traded dry-cargo shipping companies had insulated themselves to some degree from the fluctuations of the spot market, having locked their fleets into long-term contracts with raw materials suppliers. Thus, the spot-market plunge wouldn't ruin profits at most companies.

Owners also had taken countermeasures. They were removing ships from service, either mothballing them or selling the oldest ones for scrap. But no one believed that scrapping alone would cull the fleet enough to assuage the impact of all those new ships. "Rates are going to be under pressure all year," says Commodore Research analyst Landsberg. "I'm not optimistic."

Jan. 4: DryShips Inks Drillships Contracts

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DryShips ( DRYS), the controversial Greek shipping concern, announced Jan. 4 that it had "entered into" another set of charter contracts for three of its oil-exploration rigs, known as "drillships" in the maritime trade. All told, the contracts were worth $590 million over their multiyear lifespans, DryShips said.

The company's shares continued their roller-coaster ride following the announcement. In morning trading the day of the release, the stock popped by as much as 5%. Those gains came after losing about 5% in the previous session, when Morgan Stanley ( MS) downgraded DryShips' stock.

Four drillships in the company's nascent oil-exploration fleet were in the process of being built at a South Korean shipyard. The biggest of the charter contracts announced Tuesday was for one of those newbuildings -- a drillship called the Poseidon, hired out by Brazilian energy giant Petrobras ( PBR) for use off the coast of Tanzania. The charter period was 600 days.

As part of the deal, one of DryShips' operating rigs, the Leiv Eiriksson, was to be released from its current Petrobas contract. Scotland's Cairn Energy would hire out the Eiriksson and another DryShips newbuilding, the Corcovado, for six months apiece. Those fixtures were for $95 million and $142 million, respectively.

Only one of its four newbuildings remained without a charter contract. DryShips tried for most of last year to hire out these ships, fixtures that would guarantee its ability to pay for them. DryShips had struggled to find charterers, however, until December 2010. The last of the newbuildings, the Mykonos, was scheduled for delivery in the fourth quarter of 2011.

Also in December, DryShips announced a deal to acquire 12 oil-tanker newbuildings for $780 million. The purchase garnered some criticism for its riskiness as well as for being a potential related-party transaction, as alleged by Morgan Stanley in its downgrade Jan. 3.

-- Written by Scott Eden in New York

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