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Dry Bulk Shipping Rates Crash the Most in 30 Years. Market Freakout?

By Blake Bos – Jan 29, 2014 at 8:38PM

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Dry bulk shipping rates have been absolutely gutted since the start of the new year, and dry bulk shipper shares are crashing as a result. Should investors keep their hopes up for a rebound?

The Baltic Dry Index is now down 48% since the start of the new year. While a rate drop-off in the new year is typical because the Chinese New Year decreases demand in the world's largest economy, what is uncommon here is the magnitude of this drop. An article from Zerohedge points out that this is the biggest drop in 30 years for this part of the year, though even after the drop, rates are still 50% higher than they were at this point last year.

In this video, Motley Fool industrials analyst Blake Bos looks at how this is affecting dry bulk shipping companies, such as DryShips (DRYS) and Genco Shipping (GNK 0.50%). With the enormous amount of debt that companies in this industry typically carry, many investors are worried that the companies won't be able to remain in business with rates at these levels, and the stocks look to be selling off as a result.

Blake also mentions that shipping rates do tend to rebound going into the summer, so for these shipping companies, it's vital that the rebound is a strong one. Various pundits are calling for a shipping-rates rebound in 2014, though Blake is less optimistic and still sees a lot of rough seas ahead for these companies.

Blake Bos and The Motley Fool have no position in any of the stocks mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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