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Why Castor Maritime Stock Collapsed Today

By Rich Smith - May 28, 2021 at 11:49AM

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Declines on the Baltic Dry Index are starting to look like a trend -- down.

What happened

Three days ago, dry bulk shipper Castor Maritime (CTRM 0.00%) dodged a bullet when declines on the Baltic Dry Index (BDI) pulled down shares of other dry bulk shipping stocks but failed to pull down Castor Maritime along with them.

Gravity will not be denied, however, and today, as the BDI continues to slump, Castor Maritime stock is going down as well, falling 11% through 11:15 a.m. EDT.

Glowing red stock chart arrow trending down

Image source: Getty Images.

So what

The BDI tracks the rates that shipping companies can charge for hauling dry bulk goods (coal, iron pellets, grain, and the like). As such, it is often viewed by investors as a predictor of where dry bulk profits are heading.

And after more than doubling through early May this year, the BDI has been in a confirmed downtrend ever since May 11, falling 17% in 17 days.  

Now what

That looks like bad news for all dry bulk shipping stocks, but for Castor Maritime more than the others. Consider that, thanks to the prices reflected on the rising BDI, most dry bulk shippers have been earning bumper profits this year -- but Castor Maritime has not. Instead, data from S&P Global Market Intelligence shows that the company has lost money for four straight quarters.

So if Castor Maritime couldn't earn a profit when the BDI was going up, the question becomes: How will it ever earn a profit now that the BDI is going down again?

And that is, in fact, the question investors seem to be asking today.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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