Shipping Stocks Blog kickoff

I have been working on the look of this site for a while now and there are still some things I would like to change but I thought it was time to take it public and start to generate some information and articles on the topic of Shipping Stocks. I want this blog to be a combination of analysis (by me), links to current news items in the sector and hopefully some good feedback from you readers.

My other stock market blog, Investing Thoughts, has most of its content picked up by Seeking Alpha and a couple of other agregation sites so it is available in several locales in the WWW. I plan on keeping the content here more exclusive. It is probable that I will let Seeking Alpha put up an occasional article, but to keep up with the news here you will have to check in regularly or sign up for email or RSS notification. Links to do this should be easy to find on any page of this site.

As I write this there is considerable turmoil in the shipping sector. A week or so ago the group as a whole was nicely in positive territory for the year. Over the last week  the returns have moved strongly into negative territory as the market has tumbled back to the neighborhood of the November 2008 lows. The 42 shipping stocks that I am watching (more details in future articles) are now down an average of 14.5%  year to date. Here is a quick outline of how I currently see the subsectors in the shipping space.

Tanker Stocks: The tankers have fallen less than the other shipping stocks, but seem to be staying alive on the contango trade, especially the VLCCs. The cuts in OPEC production at some point has to start reducing demand for super tankers. The Suezmax carriers seem to be staying at a steady rate on the unwillingness of producers in places like West Africa and Venuzuela to significantly cut production  and still must ship their oil somewhere. That said, current tanker spot rates are probably, roughly 25% below what they were in the 4th quarter of 2008.

Dry Bulk Carriers: The various Baltic Dry Bulk indices have rallied strongly off their December lows and a vessel on the spot market is now probably at some level of profitability (debt not included!). Many of the bulker have a problem however with their charterers. During the craziness of last summer many ships were leased to charters of allegedly good credit at very strong rates. These charterers then released the ships to less credit worthy parties at what now seem to be exorbitant rates. These charters and especially subcharterers are now saying why should I keep paying $110k per day (for example) when I can go get the same size vessel on the spot market for $20k to $30k. The subcharter stops paying, the 1st level charter has nothing to pay with and the vessel owning company is left holding the bag with a loan to make payments on. Results: companies are suspending dividends and trying to work out something with their creditors.

Container and other shipping: This is a sector I have not dug into yet. The 8 stocks in my version of this subsector are off an average of 18% YTD. My guess is that the global credit crunch and slow trade of manufactured goods will cause problems here for a while.

Many pundits have hypothesized that the BDI could be a leading indicator of global economic recovery. If true, the recent moves in the index are a good sign. For investors in shipping stocks, there are as many different stories as there are companies, even though the stock market moves them en masse most of the time. As this site progresses I plan to dig into the stories and bring you some informative background on these companies. I find them to be an interesting bunch.

So welcome to the site, come back often, tell your friends.