While this is generally Hohum’s bailiwick, I found this article interesting:
The supply-demand dynamic has turned around over the past four months. Barring DS Norden, all the stocks under our coverage have plunged. Golden Ocean (GOGL) led the pack with the highest fall of 47.2%, followed by Star Bulk Carriers (SBLK), Diana Shipping (DSX) and Pacific Basin (2343.HK), which fell by 37.9%, 32% and 32%, respectively. On the contrary, DS Norden’s (DNORD’s) stock price increased by 8.3% reflecting the company’s exposure to the product tanker market, which benefitted from the higher freight rates.
Reasons for the fall in stock prices
1. Geopolitical tensions contribute to bearish sentiments
The ongoing geopolitical crisis, heightened inflation and restrictive monetary policies have forced investors to reassess the prospects of broad-based equity markets, with dry bulk stocks being no exception.
2. China’s slowing economy
The fall in the BDI can also be attributed to the following factors. 1) China’s slow economic growth due to manufacturing shutdowns. Major cities were under lockdowns, which led to rationing of electricity as well as low steel output and weak iron ore demand in addition to the property crisis that is worsening. 2) Heatwaves and draught destroyed crops in the country. 3) The government’s aim to reduce steel output for lowering the country’s carbon emissions.
However, the stimulus package from the Chinese government is primarily focused on infrastructure development, which in turn should drive iron ore demand and support steel production from 4Q22, presuming the Covid situation remains under control and more lockdowns in steel-producing regions are avoided.
3. Easing port congestion increases supply
In Europe, congestion eased due to the fall in commodity demand and in China due to easing Covid-linked restrictions. Both factors led to decongestion at ports and increased tonnage availability. As a result, freight rates have started trending downwards.
The dry bulk shipping market is expected to remain challenging in the near term, but is likely to improve over the long term. Chinese demand will recover gradually since stimulus policies will be implemented and factories start functioning again after lockdowns in their regions are removed. We believe dry bulk companies will be attractive for long-term investment as they will start benefiting from improving supply-demand dynamics in the market.