In a reportentitled “Don’t Jump the Gun” Benjamin Nolan of Stifel said there’s a chance thatit could take several months for freight rates to rebound, which could in turndrive US-listed bulker stocks lower if levels were to continue to hover at ornear breakeven.
“Since the beginning of 2014, dry bulk rates, and specifically capesize rates, have experienced a virtually uninterrupted free fall,” Nolan, the US investment bank’s top shipping researcher, explained in a late-breaking note.
“While many investors expected the collapse as part of the normal trading pattern in which Chinese iron ore buying and ship demand fall in conjunction with the Chinese New Year there are also strong expectations among market participants that rates are likely to bounce immediately back to pre-holiday levels.
“Although we do believe the dry bulk market is in the process of a cyclical recovery, we also believe the data shows that a recovery in rates is likely to be more protracted than immediate.”
Nolan noted capesize rates typically take between ten and 12 weeks to recover upon conclusion of the Chinese New Year and said steel producers are unlikely to return to the iron ore market right away since Chinese inventories are at a 15-month high.
Based on the equity researcher’s cautious near-term outlook for the dry-bulk segment Stifel stamped US-quoted shares of Greek bulker owners Diana Shipping, Star Bulk Carriers, Navios Maritime Holdings and Navios Maritime Partners with “hold” ratings.
