Dry bulk shipping stocks hit a reef today and are sinking fast.
As of 12:25 p.m. EDT, shares of Star Bulk Carriers (SBLK 1.14%) are down 10%, followed in quick succession by:
- Safe Bulkers (SB -0.59%), down 10.1%;
- Seanergy Maritime Holdings (SHIP 4.36%), down 10.2%; and
- Pangaea Logistics Solutions (PANL -0.17%) -- leading the pack lower with an 11.8% decline.
What's going wrong with the dry bulk shipping market today? Honestly, not ... much -- at all!
Remember how I told you earlier in the month that the Baltic Exchange Dry Index, which tracks shipping rates for vessels carrying cargo such as iron ore, coal, and grain, was in a funk -- down 10% from its August high? Well, that problem fixed itself in a hurry, and as of close of trading last week, the BDI was back to hitting new highs again, closing Friday at 4,275, its highest level ever in the past five years, according to data from Bloomberg.
Indeed, things are going so good in dry bulk shipping right now that on Friday, analysts at B. Riley Financial initiated coverage of the last stock on this list -- Pangaea -- with a buy rating and a $7.50 price target that implied more than 50% upside from today's prices.
Pangaea stock is headed in the other direction, as are all the other dry bulk stocks. In the context of how the BDI looks today, that may not make much sense. But in the context of tomorrow, it might.
By now, you've probably heard that in China, a big property investment company by the name of Evergrande Group is looking anything but grand. In fact, it's imploding on fears that it may have to default on its debts. Investors are worrying that this could lead to defaults across China, probably destabilizing the property market (a big importer of iron to build buildings), and potentially disrupting the economy at large (which imports a whole lot of other dry bulk stuff).
If and when that happens, it's almost certain to have an effect on dry bulk shipping demand, by lowering demand for imports, and in turn, for ships to ship those imports. That's what dry bulk investors are betting against today -- the fear that today's boom market may not last.