Many thanks for the ongoing quality of the service you are providing. I am writing to enquire about your opinion the dry bulk industry. Just by looking at the individual stocks' chart (SBLK, SB, GOGL, DRYS) as well as the dry bulk index, they seem to have bottomed out and in an initial stage of recovery. I am not very familiar with the drivers of this particular industry, but I find the chart action quite appealing. Any kind of input would be highly appreciated.

Eoin Treacy's view

Thank you for this topical question. Shipping is a highly cyclical business and has been in a funk since the decline that followed the heady days of the commodity boom. With high shipping rates, new ships were ordered and have been delivered. However the fall-off in global growth meant all that extra capacity contributed to a situation where there are plenty of ships to cater to the world’s freight requirements. So what has changed?

There are two big stories affecting the shipping sector at present. The first is the Ballast Water Management Convention which comes into effect later this year. I posted a report, kindly forwarded by a subscriber, on February 10th discussing the issue. The thrust of the argument is that to avoidl the transportation of invasive species ships will need to install expensive new ballast control systems. 

The second is the drive to clean up the fuel oil sector which comes into effect in 2020 and will require either refiners to produce cleaner fuel or shippers to perform expensive retrofits on existing engines to scrub out contaminants. Also see Comment of the Day on April 5th. 

Take a look at the ships for sale on this site to get an idea of just how much of an effect the above developments are having on prices. It is possible with little difficulty to find ships trading below their scrap value. That’s great news for shipping companies that have newer ships because it represents the potential for supply to come off the market.   

The Baltic Dry Index has rallied in a choppy manner from 300 to 1200 since early 2016. It exhibits a rounding characteristic consistent with accumulation but is somewhat overbought in the short term. 




Star Bulk Carriers, Safe Bulkers, Knightsbridge Tankers, Dryships all pulled back sharply on Friday to signal peaks of at least near-term significance. Some consolidation of what have been powerful rallies over the last few months is now looking increasingly likely.