I have said before that Darwin would have married Diana, as her adaptive prowess undoubtedly would have piqued his interest. Since Darwin was not afraid to tell it like it is despite contrary prevailing beliefs, I suspect he may have appreciated this quality in Diana as well.

Diana Shipping (NYSE:DSX) delivered very passable results for the first quarter under market conditions that can only be described as devastating. Time charter revenues fell 21% to $62.7 million, as charter rates previously divorced from the collapse in the spot market by extended-term contracts finally began to show the impacts of the new pricing reality. Diana earned $34.8 million, a decline of 35%, on the heels of a 23% drop in rates charged to clients like BHP Billiton (NYSE:BHP). Debt-laden competitor DryShips (NASDAQ:DRYS), which unlike Diana has some exposure to spot market pricing, saw a deeper 59% reduction in operating revenue.

Seven of Diana's 13 Panamax class vessels are now hired for rates below $20,000 per day. In the initial phases of the BDI collapse, I posited that shippers without spot market exposure could bridge the disruption if it proved short-lived. It has not, and comments from Diana's management in the conference call suggest an increasingly bleak medium-term outlook for the dry bulk industry at large.

Diana's management is concerned about the global supply of new vessels presently on the order books, and considers the situation a danger not only to operators facing oversupply, but also to the banks financing the constructions and the shipyards that build them. Diana's president, Anastassis Margaronis, believes that some shipping analysts and ship owners have not come to grips with the crisis, and warned of a potential "wave of destruction for banks to rival the subprime crisis." Sending a chill down this Fool's spine, Margaronis then reiterated his position that "the challenge for most shipping companies will be to survive over the next two years or so, and then optimism will hopefully return to the industry."

The salient message to Fools is that the dry bulk sector at large remains fraught with significant risk. Before the outlook can improve materially, we should not be surprised to see further bankruptcies as oversupply is eliminated through brutal natural selection. I continue to view Diana and Navios Maritime (NYSE:NM) as the best-positioned shippers in the fleet to survive this protracted downturn, and I will delve into Eagle Bulk Shipping's (NASDAQ:EGLE) earnings to determine whether it remains my number three. Debt-stressed operators like DryShips and Excel Maritime Carriers (NYSE:EXM) continue to warrant considerable caution.

Further Foolishness:

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Fool contributor Christopher Barker captains yachts somewhat smaller than dry bulk carriers. He can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He owns shares of BHP Billiton and Diana Shipping. The Motley Fool has a seaworthy disclosure policy.