In an alert issued Thursday morning Omar Nokta of Clarkson Capital Markets acknowledged that the dry-bulk segment has been under “significant pressure” in recent months and noted freight rates are hovering at or near multi-year lows.
“Term charters have been slow to come by, asset values are on the decline and companies are facing a liquidity crunch,” he added.
While this may be the case Nokta is confident that day rates are going to rebound in the near-term, which bodes well for dry-bulk equities that, in some cases, have fallen by as much as 70% since the start of 2014.
“We believe that the spot dry bulk market is in-line for a positive jolt as three key pieces have lined up positively for the first time in several months: rising steel prices, wider steel margins and cheaper imported iron ore into China,” the analyst continued.
“It has been a generally rare event for all three to match up well, and in recent years has happened once every 12 to 15 months. As such we expect a sizable jump in capesize vessel demand, which we expect will allow freight rates to ‘breathe’.”
While Nokta admitted that the dry-bulk segment still faces headwinds, he believes investors will be able to cash in on a near-term rally in freight rates and “short term trading opportunity” if they assemble a “basket” of dry-bulk stocks.
The forecaster identified shares of Baltic Trading, Navios Maritime Holdings, Scorpio Bulkers, Safe Bulkers, Star Bulk Carriers and Knightsbridge Shipping as “prime beneficiaries” of a rebound in the spot market.
“Capesize rates are currently assessed at around $4,000 per day and we believe a short-term swing close to $20,000 per day can be on the horizon,” he added.
Of the 14 New York and Nasdaq-quoted bulker operators listed on the TradeWinds Shipping Index, all but four were gaining traction in midday trading Thursday.
