Shares of dry bulk shipping company Diana Expedition (NYSE: DSX) jumped more than 10% at the start of the session on Tuesday before giving up some of its gains and closing the session up 5.9%.
Good news in the dry bulk industry seems to be the cause.
Image source: Getty Images.
As Hellenic Shipping News reported yesterday, the dry bulk market has “strengthened” of late, with transatlantic freight rates in particular rising since mid-August. And in a follow-up article this morning, Hellenic Shipping News noted that the tariffs on the Supramax and Handysize transport vessels “are getting closer. [to rates last seen in] the record year of 2008. ”
Additionally, in a separate article, the global shipping news journal TradeWinds predicted over the weekend that the dry bulk market “is expected to remain strong” at least through the remainder of 2021.
That being said, investors shouldn’t take these predictions as gospel. While it is true that the tariffs for dry bulk transport have fallen – the Baltic Exchange Dry Index is actually up three times since the start of the year – the index has actually retreated from its high of 4,235 on August 27, falling 10% until yesterday’s close.
Investors should keep in mind that in cyclical sectors like shipping, high prices tend to cause shippers to increase their capacity to capitalize on windfall profits, which in turn reduces those profits as supply increases. and demand are rebalancing.
Diana Shipping’s stock price may be up in the face of this slowdown right now, but it won’t be able to defy gravity forever. If dry bulk shipping prices don’t start rising again soon, you can expect Diana’s stock price to start falling as soon as possible.
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