What happened

Shares of dry bulk oceangoing shippers Star Bulk Carriers (SBLK -0.41%), Scorpio Bulkers (NYSE: SALT), and Diana Shipping (DSX -1.77%) all enjoyed big gains in March, with Star Bulk rising 19.5%, Scorpio up 16.5%, and Diana gaining 15.8%, according to S&P Global Market Intelligence.

So what

None of the three companies reported earnings last month, or anything else of note, for that matter. Instead, the big news -- and the news that would best explain so many stocks, from the same industry, all rising in tandem -- is that average carriage rates among shippers of dry bulk cargo are on the upswing.

Data from the Baltic Dry Index, which tracks such carriage rates, finally re-passed the magic "1,000" level (at which the BDI was initiated on January 4, 1985) on March 7. This was the first time shipping rates for dry cargo had been so high since mid-December of last year. What's more, the rates didn't stop there. Instead, after entering the month at a level of 859, the BDI kept on climbing all the way to 1,338, hitting that peak on March 29.

Tug boat pulling a bulk cargo ship across the water.

Morgan Stanley tried to give dry bulk shipping stocks a tug upward last month -- but will it last? Image source: Getty Images.

Now what

Playing the role of contrarian indicator, investment banker Morgan Stanley promptly stepped forward and declared that the dry bulk market had "passed through its cyclical lows," and dry bulk shipping stocks would henceforth march higher as their companies began earning profits again. Naturally, no sooner had Morgan Stanley uttered these words than the BDI began tanking.

Currently quoted at 1,282, the BDI still sits well above its historical "baseline" level of 1,000, and it is showing prices nearly three times what they were averaging a year ago. However, it has fallen more than 4% below the high set on March 29 -- the high that prompted Morgan Stanley to sound the all-clear.

Will the BDI continue to tank? That depends on whether Morgan Stanley was right on the fundamentals, and not just observing a price point that was glaringly evident to everyone else watching the BDI as well. In that regard, Morgan Stanley argues that with ship newbuilds slowing and older cargo vessels continuing to be scrapped in response to tightened environmental regulations, long-term fleet growth in the dry bulk sector is likely to average only 1% annually over the next several years. This, says the analyst, will help to cure the situation of chronic overcapacity in the sector, and allow shippers who've survived the downturn to begin charging higher rates and earning higher profits going forward.

Meanwhile, on the demand side, Morgan Stanley sees rising steel prices increasing demand for iron ore shipments to China -- a trend that would also lend itself to stronger pricing power for the shippers. For Morgan Stanley to be proven right about the BDI having "passed through its cyclical lows" -- and for investors in Star Bulk Carriers, Scorpio Bulkers, and Diana Shipping to profit -- the analyst has to also be right about both of these two contributing trends.

So...fingers crossed.