Shares of drybulk shippers jumped on Friday as the cost of chartering vessels extended its advance, a sign that the global economy -- powered in large part by China -- is expanding at a smart pace. Drybulk future rates were up about 17% from last week with an average Capesize rate at $137,000 per vessel per day, up from $116,000, said Cantor Fitzgerald analysts. Meanwhile, spot rates for Capesize vessels, which are the largest ships, shot up on Friday to $177,418, up 2.9%, from $172,369 on Thursday, but down slightly from last week. A year ago, however, the rate was below $68,000. One reason may be that the world's largest iron ore producer, Brazil's Companhia Vale do Rio Doce, said on Thursday that it had begun discussions with its customers over iron-ore prices for next year. China is the world's biggest iron importer, and it gets 24% of its needs from Brazil. Analysts and investors are expecting significant price increases for iron ore in 2008, indicating strong demand. In turn, dry bulk forward rates for 2008 are also showing increases.
On Friday, dry bulk shipping stocks shot up, with those most exposed to the spot market posting the biggest rises.
DryShips, which is heavily exposed to spot rates, saw its shares jump 5.0%, or $4.52, to $94.48 at the close, while Diana Shipping shot up 4.5%, or $1.52, to $35.41. Excel Maritime rose 1.4%, or 76 cents, to $53.54; Quintana Maritime gained 3.1%, or 79 cents, to $26.55; and Euroseas increased 4.0%, or 58 cents, to $15.20.
Dahlman Rose analyst Omar Nokta said China's demand for ships to deliver steel exports continues to be strong, which proves that the global economy isn't slowing. "Until we start seeing steel prices ease, things are still very strong," Nokta said.
Last year at this time, Nokta said, there were also a lot of concerns, but he kept reassuring investors that as long as drybulk stocks were strong the economy was doing fine. "At this moment in time drybulk is still rocking, but it remains to be seen what's going to happen going forward."
For now, Chinese demand keeps increasing with projects lined up for next year. "Right now it doesn't seem like they'll just go off a cliff," Nokta said.
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