The dry bulk shipping stocks as a group have plunged 40,000 leagues or more from where they stood at the beginning of 2011, and the longer-term charts hardly look any prettier.
Increasingly, the prolonged nature of the industry's epic downturn has yielded a set of distressed equity valuations that suggest the market questions the very survivability of these operators. While there is no sign that the challenges facing these shippers are abating, the bravest of value investors may wish to continue scouring this beleaguered industry for those operators that are least likely to sink to the seafloor in outright failure.
With an adaptive approach to survival of the fittest that Charles Darwin himself would have admired, I have repeatedly highlighted Diana Shipping
Navios Maritime Holdings
But let's face it: a profit is a profit, and considering that spot-charter rates dipped beneath break-even levels during the period, both operators exhibited resilience by posting any profit at all. Of course, their achievements are due in large part to the use of long-term charter contracts that can insulate operators from volatility in the spot-rate environment. The longer these spot-charter rates remain insufficient for a spot operator like Baltic Trading
For now, Navios saw its average charter rate dip by only 10.4% to $23,681 per day. If this rate environment fails to improve for 2012 -- when only 45% of Navios' available days are covered by existing time charters -- Fools can expect the average rate to contract further. With ongoing profitability in question for all dry bulk operators, however, Fools may find some comfort in Navios' reasonable net-debt-to-capitalization ratio of 44.7%, and the insurance coverage that protects against the counterparty risk of chartering clients. Although I am in no hurry to initiate or add to any positions in the dry bulk industry at present, I will add Navios Maritime Holdings to my list of operators that I consider likely to survive the industry's crisis. The challenges will likely mount, particularly as Vale's