Leading up to the market peak, shippers made the fatal error of buying the boom frenzy and ordering the construction of new ships. Once credit markets constricted it was too late for shippers to turn back. By 2009 the dime had been dropped, orders placed, payment promised, they saw a total a total collapse of freight rates; each battling the other for dwindling world wide business (see video)
Many traders believed QE would lift all boats (pun intended) and struggled over and over again to find a bottom in the Baltic Dry Index but to no avail. Wasn't China going to stockpile again? For years we had be "programmed" to that belief. Many simply did not comprehend the impact of world-wide tightening and slowdown, even in China. Voracious demand did not return and oversupply of vessels meant freight rates continued to see pressure even with the Feds money printing as new ships continued to be delivered.
Then finally, a glimmer of hope. Moodys projected that most new ships would be delivered in 2012 or 2013. Market theory began circulating that maybe, just maybe the end was approaching. In the meantime, shippers have been on a long road to healing and that's a good thing........for those names who survive and don't find their way to the OTC graveyard. Record low rates have allowed for credit terms to be renegotiated and M&A may be heating up. NAT recently completed its acquisition of Scandic American and DSX announced a new loan facility, just to name a few. I imagine we'll see much more of the same going forward as global economies heal and business prospects improve. Old vessels continue to be retired/scrapped and with any luck all new deliveries will be completed in due course.
The glimmer of hope may be a lighthouse with prospects of higher shipping rates coming in May; as much as 50% higher in fact which would be a wonderful development.
From a chartist point of view, 2012 may well have been a year of forming a bottom or basing but only time will tell.
$BDI appears to be supported at these lower levels and there has been talk of Asian interests in shipping names. I personally have begun to accumulate NAT as a drawer stock and will continue to accumulate going forward. I will confess quite often I am too early to the party and there remains the chance of more pain to come but if you ask me if shippers are closer to the lighthouse and safe harbors? I for one truly believe so.
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