Clearing smoke

It is too early to sound the death knoll for the dry-bulk sector despite the brutal sell-off of stocks this week, a leading analyst says.

Erik Helberg, Head of Shipping Research, Pareto Securities.

Pareto’s Erik Helberg says the fundamentals of the industry are not yet as weak as some fear.

In the bank’s latest dry-bulk update, Helberg said: “We don’t have any particular insight into how the credit crisis will play out, but we are assuming that the financial issues will be worked out and not translated into an economic meltdown, although a significant global slowdown now appears to be discounted.

“We thus believe the weakness in fundamentals is being exaggerated, at least in the short-term.

“When the smoke clears, we expect the landscape to look somewhat better than the market presently thinks.”

Helberg adds he expects rates to recover and to see “some stabilization”. He concedes, however, unless some sort of stability returns to the financial markets, the risk of “panic selling” remains.

He tells TradeWinds the decline in bulker stocks means dry investors can now get “a dollar for 50 cents” based on the net asset values of shipowners.

He says shutdowns in production to cut pollution for the Olympic Games in China have exaggerated the seasonal low for the sector this year. But he claims he has yet to see any clear data to support suggestions of a longer-term dry-bulk crash which is “fresh of extraordinary impulses”.

Helberg said: “Yes, we have seen steel prices come off, but steel prices always come off in August.

“We think it’s too early to say it’s totally game over in China and they’re not going to build anything anymore in the way the current market is discounting.”

“We had the same situation in February and at that time people were saying the slowdown in the US could have significant impact on export growth. Dry-bulk fell like a stone, but then there was a significant rebound.”

Despite his optimistic mood, Helberg added: “Should there be no positive signs in the coming weeks then I would start to be really worried.”

TradeWinds reported Monday that US shipping stocks had taken a beating.

Bulker owner Aries Maritime Transport fared worst in the market’s plummet, losing 32.4% of its value to reach $1.25 per share.

Greece-based Safe Bulkers, meanwhile, saw its shares drop 26.1% to $6.89 on the New York Stock Exchange, while other bulker owners also suffered.

Excel Maritime Carriers, OceanFreight, Genco Shipping & Trading, DryShips, Diana Shipping, TBS International and Eagle Bulk Shipping all saw their shares lose 15% of their value.

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