Dry Bulk Rally Poised to Cool Off - Wells Fargo (DSX) (EGLE) (GNK)

September 30, 2013 8:26 AM EDT
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Price: $3.70 -0.54%

Rating Summary:
    3 Buy, 14 Hold, 4 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 35 | Down: 31 | New: 11
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Wells Fargo maintained an Underperform rating on Diana Shipping (NYSE: DSX), Eagle Bulk Shipping, Inc. (Nasdaq: EGLE), and Genco Shipping & Trading (NYSE: GNK). Analyst Michael Webber expects dry bulk stocks to cool off as rates ease into the Chinese holiday. Overall Webber remains cautious on the group as rate improvement likely does little to improve their long-term fundamental outlook.

"After rising ~290% since 8/19 to $42,211/day, Capesize spot rates have declined ~10% to $38,023/day since Wednesday, with the group's collective August/early September shortsqueeze starting to (modestly) give way along with day rates with
GNK, EGLE and DSX down 13%, 3%, and 3%, respectively (vs. S&P 500, 0.1%)," said Webber.

"Despite the modest pull back, Capesize spot rates remain ~235% above their Q2 average of $11,352/day, on the back of increased fixtures and broader Chinese iron ore restocking. That said, we note than rates remain 35% above Q4 forward agreements (FFAs), which are off ~11% since Wednesday, while 20142015 FFAs are ~50 60% below spot rates, as the FFA market reflects more normalized levels (although we note the FFA curve typically exhibits backwardation). Our dry bulk channels and FFA contacts expect the market to continue easing week amid the Chinese Golden week holiday, potentially moving closer to ~$30,000/day, with the October/November timeframe an interesting barometer for the market: while we could see rates continue to slide, Atlantic-based grain season could provide some support, potentially boosting Panamax volumes, making it more difficult/expensive to split the larger Capesize cargos," he added.

For an analyst ratings summary and ratings history on Diana Shipping click here. For more ratings news on Diana Shipping click here.

Shares of Diana Shipping closed at $12.21 yesterday.

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