These remain treacherous times for the seaborne carriers of commodities called dry bulk shippers. While industry leaders gather in New York City to discuss the challenges, one intrepid shipper is boldly throttling up to position itself for long-term recovery of commodity demand.
The topics at the annual Big Apple gathering called "Marine Money Week" highlight the massive shift of fortunes that has befallen the industry since the boom times of yesteryear. This year's theme is "liquidity, liquidity, liquidity," described as the "single most important key to success for a shipowner the next 12 months." One session will pose the question: "Have we really survived the worst?"
Ever since the perfect storm of crunching credit and disrupted demand slammed shippers last year, I have touted Diana Shipping
This week, Navios surprised this Fool by announcing the addition of four new massive vessels to that already aggressive order book.
After Diana Shipping's stark warning last month regarding excessive orders for new tonnage that must be purged from the industry to stave off a looming financial disaster, I am concerned that a new, more modest baseline for global commodity demand could fail to support such sizable additions to the global fleet for Capesize vessels (the largest bulk carriers made).
Capesize carriers are used primarily for carrying coal and iron ore, and I remain bullish on long-term demand for these products with respect to Asia and other emerging economies. However, China spilled some milk on that picture this week with the discovery of a 3 billion-ton deposit of iron ore in the Liaoning Province (near Beijing).
Although not of grades matching the rich ores of Brazil and Australia, the deposit could still impact long-term import demand for the Chinese steel industry, and therefore reduce shipments for major global suppliers like BHP Billiton
Navios has long-term contracts in place for these new additions as well, promises a $43 million boost to annual EBITDA from the four vessels, and will issue convertible shares to fund the purchase. By continuing to avoid excessive debt loads and employing ships before they're delivered, Navios remains more seaworthy than competitors like DryShips
Fool contributor Christopher Barker captains yachts 1,000 times 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, Diana Shipping, and Vale. The Motley Fool has a seaworthy disclosure policy.