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Dry bulk stocks have long faced adverse headwinds following the worsening market conditions following the drought that hit Brazil in early February.
But suddenly the situation has turned and rates have climbed all right as a projectile.
The Baltic Dry index rose 1.9% to 2170 points on Friday. This represents an increase of nearly 90% last month and about 71% since the New Year.
The Baltic Dry index has not been higher since 2013.
Capesize rates are now around $ 32,200 a day, compared with an average of $ 11,800 a year this year.
Demand for iron ore from China will be stronger than ever. The vessels are leased on the road linking Brazil and China, which is rapidly pushing the rate of use to the north.
Golden Ocean's share has increased by almost 50% since June and Star Bulk has also lost about 40% over the same period.
Nevertheless, there can still be a great potential in space.
– Designed for one of the longest periods of cyclical expansion since the 1740s
Joakim Hannisdahl, Head of Analysis at Cleaves Securities, closely follows the industry and has no "Norwegian" shares as his favorite among the bulk bulk carriers.
– My favorite is Genco Shipping, where there is a 50% advantage over our target price of $ 16, says Hegnar.no's analyst about the title, which has traded at 10, $ 41 at the closing of Friday.
Genco Shipping is a bulk carrier based in New York with ISIN Marshall Islands. The company controls 58 vessels, including 17 Capesize, two Panamax, 20 Supramax, 13 Handysize and six Ultramax. The average age of the fleet is about 9.4 years and the company is primarily exposed to the spot market.
The Genco share has exceeded 40% since mid-June, but Mr Hannisdahl still sees a significant gain in the case.
– The company enjoys a discount of 32% on adjusted equity (NAV) and an EV / EBITDA ratio of 4x and 2x in 2020 and 202 respectively. We believe that ship values will increase in the future, says Hannisdahl.
The Cleaves analyst points out to Hegnar.no that the weak market in the spring is due only to temporary effects.
– The dry bulk has up to now experienced a very heavy year, with a lower demand growth due, among other things, to the collapse of the dam in Brazil and a particularly strong cyclone in Australia. However, these are only temporary and non-systemic effects as for cyclical funds.
Hannisdahl believes that the weak market in the spring will lay the foundation for a much better market in the future.
– The positive effect of the weak market was that construction contracts for new buildings were very low and the order book is close to historical lows. So, I think it's set for one of the longest periods of cyclical expansion since the 1740s, the head of analysis ends with Hegnar.no.
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