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Why you should watch 7 key industry indicators for shipping fundamentals (Part 1)

Xun Yao Chen, Industrials Analyst

Dry bulk shipping companies lag behind economic recovery

Despite the U.S. stock market surpassing its 2008 highs recently, with the Dow Jones Industrial Index hitting 15,464.30 and S&P 500 hitting 1,680.19 as of July 12, 2013, dry bulk shipping companies have done poorly. These companies primarily transport raw materials such as iron ore, coal, and grain across the ocean. China is the major destination for these shipments.

Historic performance

While a recovery in shipments growth following the worldwide stimulus injection at the end of 2008 and in early 2009 has supported share prices throughout 2009 and 2010, industry overcapacity has remained problematic for the shipping industry. This difficulty is due to the large placement of new ship orders by shipping managers who expected global trade growth to continue at a rapid pace. As a result, share prices of shipping stocks had nowhere to go but down the drain. Many retail investors have thrown in the towel and will likely never consider investing in shipping companies again.

Turnaround ahead

But the dry bulk shipping industry is attracting renewed interest, with top analysts expecting a turnaround either this year or early next year. Here are seven key shipping indicators and drivers that reflect the current and future fundamental outlook for the shipping industry.

  1. Ship orders (Part 2)
  2. Ship construction (Part 3)
  3. Ship scrappage (Part 4)
  4. Ship capacity (Part 5)
  5. Shipping rates (Part 6)
  6. Forward contracts (Part 7)
  7. Ship prices, or vessel values (Part 8)

We update these indicators regularly on Market Realist’s website as new data becomes available. Explore the links above to learn more about the seven key shipping industry indicators and why you should watch them.

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