In 3Q23, dry bulk shipping companies reported a steep decline in net profit on a YoY basis, with some companies even plunging into losses. The TCE revenues of a portfolio of 8 companies were down 38.7% YoY in 3Q23, which showcases the weakness of the dry bulk market. Average TCE rates of these companies declined 38.8% YoY. Net income was down 75.7% YoY on an aggregate basis, attributable to a sharp fall in the topline coupled with an increase in interest expenses.
In November, the Drewry Dry Bulk Equity Index rose 2.2% due to a rise in TCE rates, but it still underperformed the S&P 500 (+8.6%), with the market expecting no further interest rate increases. While considering YTD performance, the Drewry Dry Bulk Equity Index was down 9.6%, underperforming the S&P 500 (+18.6% YTD).
Golden Ocean’s share price surged 28.3% in November as its 3Q23 results and guidance for 4Q23 were better than its peers. Share price of Star Bulk Carriers, Diana Shipping, and Pacific Basin rose by 8.7%, 4.6% and 3.8%, respectively. DS Norden was the only stock that declined in the index, and it lost 17.7% as the company outlined in 3Q23 results that it expects a reduction in margin per day in freight serviceand trading moving into 4Q23 and 2024.
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The Baltic Dry Index rose in November and reached an 18-month high. This uptick can be attributed to increased vessel demand and congestion at Panama Canal and Brazilian ports, supporting vessel earnings.
There has been a significant increase in earnings of Capesize vessels in November. This surge can be attributed to the robust demand for coal from China, as the country’s hydropower generation reached a historic low, compelling the nation to rely on coal to fulfil its energy requirements. Furthermore, China’s demand for iron ore continues to be robust, spurred by the depletion of China’s iron ore inventories and buoyant sentiments stemming from China’s economic stimulus measures. However, China’s manufacturing sector has remained in contraction, indicated by a slight decline in China’s production PMI from 49.5 in October to 49.4 in November.
There has been a rise in earnings of Panamax and Supramax vessels as Brazil’s soybean and corn exports have remained high due to historically robust harvest. Congestion at Brazil’s port is also supporting the TCE rates for Panamax and Supramax vessels.
Source: Drewry Maritime Financial Research