Baltic Dry por los suelos

 Fuente:  Greg Schnell

The shipping rates represented by the Baltic Dry Index just can't seem to get a break. With rates soaring to huge highs in 2007, new ships were ordered well into the future. As those ships are delivered and commodity demand is still slack, the Baltic Dry Index ($BDI) is dropping like a stone again. I drew a horizontal red line at the current price. Most of the lows below this level are spike lows. 

One thing to note, the rates are almost back to where they were in the 3rd and 4th Quarters of 2012. It would seem demand for shippers has not picked up yet.The surge off the lows was almost a quadruple up to 2330.  The correlation to the Shanghai Composite ($SSEC) is not great, but both of these should start to rise if demand is going to pick up meaningfully.

Market Players

Fuente: Google finance

The two major market players in the dry bulk shipping industry are DryShips Inc (DRYS), which has a market share of 35%, and Navios Maritime Holdings Inc. (NM), which has a market share of 20%. The remaining companies constitute the remaining 45% of the market.

DryShips Inc (DRYS) has performed relatively poorly as compared to the benchmark index, with a year-to-date return of -35.32%. It posted a per share loss of $0.04 for the first quarter of fiscal 2014, missing the consensus forecast by $0.02 a share. It has missed analyst estimates and posted lower EPS during the last three quarters, which is a negative indicator. The results for the latest quarter have not been released yet, but analysts expect another loss of $0.05 per share.

Navios Maritime Holdings Inc.’s (NM) year-to-date return is -18.19% – better than DryShips Inc’s (DRYS), but lagging the benchmark index. The company posted earnings per share of $0.01 for its most recently-concluded quarter, compared to the consensus estimate of -$0.13. The reason given for the earnings surprise was that the company had been able to achieve significant economies of scale due to self-management of vessels. The results were also exceptional because the company had missed consensus forecasts for the previous three periods. Analysts expect EPS of -$0.13 for the company’s second quarter of FY14.

Given this data, Navios Maritime Holdings Inc. (NM) seems like better value for investors as compared to DryShips Inc. (DRYS). Analysts also believe that freight charges will increase in the upcoming quarter due to an increase in the export of raw materials like grain and iron ore due to the seasonality effect, which will have a positive impact on these companies’ earnings.

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