Dry bulk shares took control of the shipping space in New York on Wednesday on the strength of a rates revival, higher iron-ore prices and perhaps a squeeze on short interests in the long-suffering stocks.

The gains in several cases were lusty, with Genco Shipping & Trading soaring 20%, Eagle Bulk Shipping gaining 19% and Diana Shipping rising 18%. Most of the dry stocks notched trading volumes two or three times the norm.

As TradeWinds has reported, a 113% gain today by the Baltic Exchange Capesize Index, albeit from very low levels, laid ground for the rally. Market analysts saw ramped-up production from Australian iron-ore producers.

Broader market rally

The gains also came amid a broader market rally that saw the Dow Jones Industrial Average crash through the 26,000 level and add 2%, as investors looked to the reopening of economies and shrugged off the impact of violence and protests in many US cities in recent days.

"The [dry bulk] rally is driven by a combination of improving spot rates, especially capesizes, the rally in iron-ore pricing due to China’s rebounding demand, and the short squeeze in equities that have been left for dead in recent months," Jefferies lead shipping analyst Randy Giveans said of the dry stocks.

"Similar to the two halves of 2019, we expect a very weak first half of 2020 before much stronger rates in the second half."

Short interest in the shares likely had something to do with the size of the gains on Wednesday and the unusually high trading volumes as naysayers scrambled to cover their positions, Giveans said.

Some of the same factors were cited by Clarksons Platou Securities analyst Omar Nokta.

'Promising signs'

"There have been some promising signs from the Chinese steel markets, with both iron-ore and steel prices moving higher over the past couple of weeks. We have seen a higher level of spot activity in the cape market this week and, while rates remain generally weak at below $10,000 a day, they are moving in a positive direction for shipowners," Nokta said.

Weak volumes from Brazil due to Covid-19 had been a damper on capesizes.

"That still remains the case to an extent but with stronger iron-ore appetite from Chinese steel players, Brazil is the swing producer that can bring long-haul cape volumes back to market," Nokta said.

He also concurred that shorts likely played a part.

"It appears so. The equities have been under so much negative pressure for the past several months," he said.

A public dry bulk executive who asked not to be identified also was enjoying the day's gains.

"Capes have gapped higher in the past couple trading sessions, albeit from very low levels. This is good for overall sentiment in the space," he said.

While dry bulk is usually a leading indicator of economic activity, the executive argued that in this case it has been a laggard compared to the recovery of broader economic indices after investors fled the riskiest bets, such as shipping stocks, in March due to the pandemic.

"So there might be a bit of catching up going on," he said.

Other gainers on the day included Star Bulk Carriers at 15% and Scorpio Bulkers at 12%.