NEW YORK, NY--(Marketwire -08/01/12)- After unexpectedly showing positive gains to start the year shipping stocks have begun to struggle once again. Oversupply in the oil tanker and dry bulk sectors continue to plague shipping rates. "Oversupply in both sectors is quite sizeable and we think that it will take 12 to 15 months to see the light at the end of the tunnel," said Marco Vetulli, senior credit officer with Moody's, a ratings agency. The Paragon Report examines investing opportunities in the Shipping Industry and provides equity research on Frontline Ltd. (FRO) and Genco Shipping & Trading Limited (GNK).
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The Baltic Dry Index, a measure of costs to ship dry-bulk commodities, since hitting a low of 647 in February has rallied 66 percent to 1074. Despite the rally the index is still 50 percent below the levels seen in October.
"Demand for shipping has rebounded from its late-2008 lows but capacity has risen even faster, causing utilization rates and hence shipping costs to plummet," Jessop says. "Order books for delivery in 2012 suggest that this year will see a further surge in supply, maintaining the downward pressure on prices."
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Frontline Ltd. has established itself as the world leader in the international seaborne transportation of crude oil, with one of the world's largest fleets of VLCC and Suezmax tankers, and Suezmax OBO carriers. The company is scheduled to release second quarter 2012 results on August 31, 2012. Shares of Frontline have fallen over 40 percent in the last three months.
Genco Shipping & Trading Limited transports iron ore, coal, grain, steel products and other drybulk cargoes along worldwide shipping routes. The company recently announced that it will hold a conference call to discuss their results for the second quarter of 2012 on Thursday, August 2, 2012 at 8:30 a.m. Eastern Time.
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