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Why all dry bulk shipping stocks just collapsed

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What happened

Dry bulk stocks hit a reef today and are collapsing rapidly.

At 12:25 p.m. EDT, shares of Featured bulk carriers (NASDAQ: SBLK) are down 10%, followed in rapid succession by:

  • Safe bulk carriers (NYSE: SB), down 10.1%;
  • Seanergy Maritime Holdings (NASDAQ: SHIP), down 10.2%; and
  • Pangea logistics solutions (NASDAQ: PANL) – leading the peloton lower with a drop of 11.8%.

Image source: Getty Images.

So what

What is wrong with the dry bulk transport market today? Honestly, not … a lot – not at all!

Remember how I told you earlier this month that the Baltic Exchange Dry Index, which tracks shipping rates for ships carrying goods such as iron ore, coal, and grain, was in a funk – down 10% from its peak in August? Well, this The issue was hastily resolved, and at the close of trading last week the BDI hit new highs again, closing Friday at 4,275, its highest level ever in the past five years. according to Bloomberg data.

Indeed, things are going so good in dry bulk transport right now as Friday, analysts at B. Riley Financial kicked off the cover of the last title on this list – Pangea – with a buy rating and a price target of $ 7.50 which implied a rise of more than 50% from today’s prices.

Now what

Pangea stock goes the other way, like all other dry bulk stocks. In the context of how BDI looks today, that might not make much sense. But as part of tomorrow, it could.

You’ve probably heard that in China, a large real estate investment company by the name of Evergrande Group looking for anything corn grandiose. In fact, he imploded for fear of having to default on his debts. Investors fear this could lead to defaults across China, likely destabilizing the real estate market (a large importer of iron for building buildings) and potentially disrupting the economy as a whole (which imports many other commodities). dry bulk).

If and when this happens, it is almost certain that it will have an effect on the demand for dry bulk shipping, reducing the demand for imports and, in turn, for ships to ship those imports. This is what dry bulk investors are betting against today – the fear that the current market boom will not last.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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