MCsweet: Thanks for the dht thoughts. I agree it may still be to early to invest big (or maybe at all) in most shipping stocks. And although DHT made money last Q I suspect only 3 of their ships make money currently (due to old contracts at favorable rates), and next year that may reduce to only one ship. So without a turnaround in shipping rates soon, the dividend is probably toast and it goes lower.
OTOH: In the report, Global Hunter Securities writes, "We believe that dry bulk is at the low point of an extreme boom-bust cycle, driven primarily by oversupply. Shipping in general is a very cyclical industry characterized by significant booms and busts. We note that this dynamic is driven by the fact that vessels are long-lived assets that have a multi-year lead time from ordering to delivery. Given this, an unexpected positive shock to demand can lead to several years of high rates, as new deliveries don't enter the fleet in sufficient quantities, which is essentially what the industry experienced starting in 2003. However, at that time, the positive shock to demand from China's voracious appetite for commodities led to an extreme spike in rates in 2006 through 2008, which also brought with it a surge in new orders for ships. Since late-2008 the dry bulk industry has been suffering from a massive supply hangover."
But it may be that investors have come to be too complacent about this cyclicality, and that is why ship building has continued at too high a rate such that the duration of this downturn may be extended. We shall see.
Best Regards, A51 |
