<@373882275429089290> So have you accounted for how the droughts are potentially affecting this industry? I’m just curious if maybe we might see a bit more downside due to lower water levels in major waterways that are traditionally used for shipping.
I also read somewhere regarding a potential worse year in 2023 due to all the supply issues, which would positively impact the manufacturers but lower the demand on shipping.
Just to contribute a bit of literature to this topic, I was also skimming through this article which seems to be an industry research report:
Fair points, @Ranger_Oz ! Dry bulk is in a bit of a flux for the following reasons:
Uncertainty around agri products, especially grain. Exports can get hit, but then imports would have to be made from other parts of the world to compensate. If they come from farther (e.g. Australia), can be bullish for dry bulk.
There’s been an increasing to switch to coal as a source of energy in some parts of the world.
China slowing down has reduced the demand for iron ore, which is the most correlated to rates
Incidentally, I’m currently researching a bunch of dry bulk shipping companies, and will share details in the next few days or so. They could see some more pullback, but most seem to be attractively priced. Just want to make sure I’m not missing something obvious, before opening positions…
EGLE, SB, SBLK and GNK are at the top of the list atm.
BDRY is in the absolute shitter right now, and going lower. Continued weak demand from China is apparently to blame. Picked up some more at $5.05. And set additional buy order for $4.05.
This is a super long term play. Might be red or neutral for months, maybe a year. But at some point, economies will reinflate.
Do note that this is an ETF that tracks the dry bulk futures market, so it decays from a variety of factors. Even if bulk rates held steady, it would bleed a bit over time.
Choosing to hold the ETF over the bulkers because BDRY seems undervalued compared to the companies, and at some point, the gap should close.
BDRY has had an insane runup over the last few weeks because of the situation with the Panama Canal - not enough water to keep locks opearting at usual speed, so the more expensive cargo like LNG is paying a premium go to through and cheaper, bulky stuff now have weeks of backlog.
Had two positions on two accounts, sold half of one with a cost basis of $5.70 for $9.19 (+61%), and half of the other with a cost basis of $6.80 for $9.18 (+35%).
Will hold the other half for a few more days to see how rates move. I don’t expect a crash in bulk rates as congestions don’t evaporate overnight.
Some pertinent data on the industry btw that is not related to this temporary squeeze in rates, but relevant for the long term:
Can’t track the Panama Canal situation closely enough to have a feel for if this will go higher, but we can almost be assured that rates will fall when the drought is gone. Since demand fundamentals of the dry bulk industry has not changed, expecting it to go down then, at which point will look to load up again.
