Time to expose the short myths on NMM. To start, take a look out the article Seeking Alpha printed on 12/4/12 titled "Have We Seen the Bottom in the Dry Bulk Industry?". It contains some excellent data.
So let's look at the short thesis on NMM:
1. The Baltic Capesize Index (BCI) has been on a decline since 11/22/12.
2. While the Baltic Dry Bulk Index (BDI) rallied from 9/27/12 through 10/23/12, seasonal effects will slow this index.
NMM has long term charters for most of its fleet and thus should not be exposed to seasonal effects.
3. 79% of all Capsized vessels in the world are under 15 years old and 73% of the Panamax fleet is under 15 years old.
4. The Capsized fleet is expected to grow by 4.3% in 2013 while the Panamax fleet is expected to increase by 11.9%.
Once again NMM has booked long term charters for most of its fleet and new building contracting for dry bulk carriers has declined 56% on a YoY basis. Shipyards have declined 40% YoY in 2012 and the scrap rate is on the rise.
5.Once NMM's long term charters run out, NMM will be faced with a more difficult environment.
Many market pundits are forecasting an improvement in the world economy next year. China' whose growth was slowing has recently seen a pick up in its growth. Steel demand is expected to grow by 3.2% in 2013. China, which accounts for 67% of overall Capesize charters, has seen its iron ore stockpile fall by 10% sequentially and 18% YoY in November. According to JP Morgan, there is room for a 30% increase in China's stockpile of iron ore.
I did hear some NYC hedge funds were trying to work the angle about what happens to NMM once those long term charters run out, but by that time the world economy should be improving which means more demand for coal and iron ore, hence NMM's fleet.
good material. the world economy has been depressed for so long that it is hard for people to envision improvement. But US, China appear to be recovering slowly, and NMM's locked in most of its revenue for next year. so a recovery by 2014 means the current 14%+ is a good deal.