Shipping Markets: QE2 Worries are Proving True

Dear Readers,

It seems that our worries about the drop in the value of the dollar are not only felt by us, but by the financial community at large. The Federal Reserve Chairman Ben Bernanke has stood by and defended his monetary stimulus, and even went so far as to implicitly accuse China that they are not doing enough to strengthen their own currency. Adding to that the fact that the Euro has strengthened for the third day in a row and that the rising commodity prices have boosted consumer price inflation in China, the financial community fears that the dollar "will become the world's 'weakest currency'". Now, whether this will be a good thing for shipping, or not, is yet to be seen by the strategies that the shipping companies will decide to enforce.

Read our original article: Shipping Markets: Quantitative Easing Round 2 - $600 billion

Best Regards,

Theo Scholiadis - S&P Broker

http://shipping-markets.blogspot.com/

N. Cotzias Shipping

Main articles used (list not exhaustive):

- Dollar to Become World's 'Weakest Currency,' Drop to 75 Yen, JP Morgan Says

[Source: Hellenic Shipping News Worldwide] [Date: 18/11/2010]

- Bernanke Defends Fed' Policy, Turns Tables on China

[Source: Bloomberg Businessweek] [Date: 19/11/2010]

- Euro Gains for Third Day; Asian Stocks, Metals Pare Weekly Drop

[Source: Bloomberg Businessweek] [Date: 19/11/2010]

BDI Sinking

Ahoy DryShippers!
Capesize turned slightly positive but the smaller vessels lost ground taking DBI with them. We are starting to hear more chatter about the breathing room (or lack of same) regarding breakeven operations. Another spanking in the works for second hand vessel valuations that are expected to decay perhaps significantly thru 12.

Do not listen to any sad shipping songs like the wreck of the ejf, especially if you happen to be palms in.

Good Fortunes
Ski

Ski's Maritime Economics Review

Ski’s Maritime Economics?
Eagle posted revenue Q3-10 at $72.8M vs. Q3-09 at $41.5M. And I quote “Net revenues of $72.8 million, an increase of 75% compared to $41.6.”. Wow, a 75% jump in revenue compared to Q3 last year. Let’s have a look at this calculation.

2010 $72,825,583 revenue net of commissions, reporting a net income of $8.2M (operating 39 vessels) divided by 62.4M shares = $0.13.
2009 $41,551,805 revenue net of commissions, reporting a net income of $0.5M (operating 25 vessels) divided by 53.4M shares = $0.01.
Revenue Q3-10 yoy is up 75.26%. They got that right and they proudly published the accomplishment.
Net Income Q3-10 yoy is up 1540%. Do you wonder why they don’t publish this unreal looking improvement?

Let’s roll this out to a year to date comparison (9MOS).
Revenue 2010 (9MOS) =$192.6M
Revenue 2009 (9MOS) =$150.5M
Net Income 2010 (9MOS) =$23.8M
Net Income 2009 (9MOS) =$31.1M
They have reported a 27% increase in ytd revenue for the first 9 months over last year, and they proudly reported it. During the same time net income has dropped ytd -23.47% and no they do not mention this number.

It does get worse!
Look at this ugly set of numbers produced when we look at Earnings per Vessel operated.

Eagle NI/VT = Net Income/ Vessel Tally (Monthly Average)

2010 9MOS Net =$23.8M or ($0.38/sh) operating 39 vessels = $67,806 per vessel.
2009 9MOS Net =$31.1M or ($0.58/sh) operating 25 vessels=$138,222 per vessel.

Eagle the company was diluted ~16.85% and operates 56% more vessels meanwhile providing shareholders a net income decrease of 23% when compared to the first 9 months of last year.

This is exactly how I will examine Safe Bulkers next time.

Good Fortunes
Ski

Dry Bits Weekly Review

Ahoy There!
Top & Bottom 5 Day: DRYS +14.92%, EGLE +2.41%, TBSI +2.30% >>>
NMM -4.00%, GNK -4.24%, SB -6.30%. The Uncle George team (DRYS) scores with its rig gigs, while a couple non capesize operators fair better than the rest. Hum? The laggard board this week is populated by some well respected players. I do better at the office football pool picking games than I do at forecasting the Dry Bits 5 Day. I did predict the “bottom feeder” syndrome would drive the Tweendecker operator to be a leader. Speaking of football. When Royce moved the company (TBSI) to Ireland, I thought of NFL owners Al Davis and fellow spank Art Modell. Both of them sporty fellows have needed to employ body guards ever since they uprooted a great deal more than just the company they moved.

The Baltics: BDI @2313 -7.29%, BCI @3612 -9.56%, BPI @2365 +2.64%,
BSI @1516 -6.87%, BHSI @833 -2.68%. Without the Pmax Girls picking up a bunch of fresh coal, this week would have been an entire bummer. The amount of ore loads does not convey the slowdown I have been reading about. +30 is cool, 28 is close.

Dry Fixtures Thursday to Thursday: Coal =3, Ore =28, HSS =1, T/C =107, Period =19, total 158.
Vessel Tally: Capes =35, PP =4, Kmax =7, Pmax =61, Smax =30, Hmax =8
Hsize =3, Bulkers =10. When we look at the ore fixtures for the last four weeks we calculate an average of 17.25 fixtures per week. The 28 ore chores listed this week is a significant rise (62%) over the mean. Keep in mind there are many fixtures listed as T/C that are hauling listed commodities, but until someone explains why this occurs, Ski reports the fixtures as recorded. This probably accounts for the sometimes large disparity reported by other market observers such as Jeffery Landsberg & John Cotzias. It is fair to say they have better access to data than this author, and the numbers they report are to be considered superior. Perhaps this disparity is why they choose to remove me from their private mailing lists. :)

Familiar Vessels: The following vessels were mentioned in the daily fixture reports. Navios Herakles, Genco Hadrian, Genco Muse, Newlead Victoria, Navios Hyperion, Genco Augustus, Zozco Shaoxing, Torm Island, Navios Titan.

Good Fortunes
Ski

Happy Birthday USMC

R 081740Z NOV 10
FM COMDT COGARD WASHINGTON DC//CCG//
TO ALCOAST
CMC WASHINGTON DC
BT
UNCLAS //N01000//
ALCOAST 547/10
COMDTNOTE 1000
SUBJ: 235TH BIRTHDAY OF THE UNITED STATES MARINE CORPS 1. ON BEHALF OF THE MEN AND WOMEN OF THE UNITED STATES COAST GUARD, I AM HONORED TO EXTEND BIRTHDAY GREETINGS TO THE UNITED STATES MARINE CORPS ON THE 235TH ANNIVERSARY OF YOUR FOUNDING.
2. ON NOVEMBER 10, 1775, THE CONTINENTAL CONGRESS PASSED A RESOLUTION CREATING TWO BATTALIONS OF MARINES TO SERVE AS LANDING FORCES FOR ITS FLEET. THIS MARKED THE BIRTH OF THE UNITED STATES MARINE CORPS. SINCE THEN, MARINES HAVE CONTINUALLY SACRIFICED TO ENSURE THE FREEDOMS WE ENJOY TODAY: FROM THE 1805 BATTLE OF DERNE WHERE MARINES SEIZED VICTORY FROM THE BARBARY PIRATES (THE FIRST SUCH ENGAGEMENT OF U.S.
FORCES OVERSEAS), TO TODAYS OPERATIONS IN THE MOUNTAINS OF AFGHANISTAN.
3. THIS SUMMER, IN THE GULF OF ADEN, ELEMENTS OF THE 15TH MARINE EXPEDITIONARY UNIT FACILITATED THE CAPTURE OF 9 SUSPECTED PIRATES, SECURING THE SAFE RESCUE OF 11 CREW MEMBERS FROM THE MOTOR VESSEL MAGELLAN STAR. MEMBERS OF COAST GUARD TACTICAL LAW ENFORCEMENT TEAM SOUTH WERE PROUD TO ASSIST, FOLLOWING IN THE SECOND WAVE TO HANDLE ENFORCEMENT ACTIVITIES AFTER THE INITIAL TAKEDOWN. TODAY, MARINES AND SUPPORTING COAST GUARDSMEN ARE PLAYING A KEY ROLE IN SECURING FREEDOM ON THE HIGH SEAS AND PROVING THEY ARE A FORMIDABLE TEAM.
4. THE MARINE CORPS HAS ALSO ADVANCED THE HUMANITARIAN ASPECTS OF U.S. OPERATIONS. FOLLOWING THIS YEARS EARTHQUAKE IN HAITI, MARINES LANDED WITHIN DAYS TO DELIVER RELIEF SUPPLIES AND PROVIDE MEDICAL AID
TO THE CITIZENS OF LEOGANE, HAITI. MARINES OF THE 22ND
EXPEDITIONARY UNIT WORKED AROUND THE CLOCK TO DELIVER 550,000 BOTTLES OF WATER, 18,000 LBS OF MEDICAL SUPPLIES, AND MORE THAN ONE MILLION DISASTER AND RELIEF RATIONS.
5. SINCE OUR OWN FOUNDING IN 1790, THE COAST GUARD HAS SERVED ALONGSIDE OUR FELLOW ARMED SERVICES ON BATTLE FRONTS AROUND THE WORLD, BUT OUR BOND WITH THE MARINES IS UNIQUE. ONE OF THE COAST GUARDS GREATEST HEROES AND ONLY MEDAL OF HONOR RECIPIENT, SIGNALMAN FIRST CLASS DOUGLAS A. MUNRO, DIED FIGHTING ALONGSIDE THE MARINES AT GUADALCANAL. TODAY, THE MARINE CORPS HONORS DOUGLAS MUNRO WITH AN ANTI-TERRORISM TRAINING FACILITY NAMED IN HIS MEMORY. HIS BRAVERY AND SACRIFICE IS OUR SHARED HERITAGE.
6. YOUR SELFLESS SERVICE IS CHERISHED BY ALL AMERICANS. YOU ARE SEMPER FI. WE WISH YOU CONTINUED SUCCESS AND ARE HONORED TO SERVE ALONGSIDE YOU. SEMPER PARATUS.
7. ADM BOB PAPP, COMMANDANT, UNITED STATES COAST GUARD, SENDS.
8. INTERNET RELEASE AUTHORIZED.

Ski's Maritime Economics Review?

Ski’s Maritime Economics Review!
Maybe when we look at some basic metrics we can see how simple earnings interpretations can be. Ask yourself what company did better and how that came to be. The more I look at earnings the less I relish the task! I will attempt to explain what I see in these figures over the weekend. Please feel free to share your opinion.

SB 2010-Q3 EPS @ .33 shares 65.8M operating 15 Vessels.
SB 2009-Q3 EPS @ .41 shares 54.5M operating 13 Vessels.

EGLE 2010-Q3 EPS @.13 shares 62.4M operating 39 Vessels
EGLE 2009-Q3 EPS @ .01 shares 61.9M operating 25 Vessels.

Good Fortunes
Ski

Goodbye to TMT

Ahoy There!
Top & Bottom 5 Day: DRYS +13.83%, EXM +9.27%, SBLK +8.21% >>>
SB +1.42%, DSX -0.21%, SHIP -2.43%. The way things have been lately, we sometimes forget what kind of numbers DRYS can put up, albeit when it moves. This company can be a momentum traders dream. The daily volume DryShips Inc. gets on the electronic exchange (NASDAQ) makes you wonder about why others have bothered with changing exchanges. Did anyone other than Boomer James notice TBSI is not listed as a laggard this week? Possible Bottom Feeders Alert ???

The Baltic Numbers Friday to Friday:
BDI @2495 -6.83%, BCI @3994 -6.28%, BPI @2304 -4.39%, BSI @1628 -6.97%, BHSI @856 -4.57%. The end of the week Panamax fixtures helped buffer the pain as the BCI crossed below the 4000 level. The narrowing of the Cape/Panamax ratio is coming at the expense of the bigger vessel. Wishful thinking had hoped the Pmaxers would gain, not just lose less than their bigger sisters.

Dry Bulk Fixtures Thursday to Thursday: Coal =9, Ore =15, Grain =1, Bauxite =1, T/C =101, Period =14, total =141. The coal requirements from TAIPOWER helped immensely at the end of the report period. Speaking of coal, are US exports rising? Ski spotted a Capesize fix loading Baltimore to Korea and a Panamax loading Norfolk to India. The weekly fixtures were populated utilizing the following vessel types. Capes =29, PPmax =2, Kmax =7, Pmax =57, Smax =39, Hmax =5, Hsize =1, Bulkers =1. On the last day of the report 25 Pmaxes were fixed saving grace.

Familiar Vessels: These vessels where involved in fixtures during the week. STX Champion, Baltic Jaguar, Navios Lumen, Genco London.

Note: This will probably be the last weekly report we (Boomer James, Dodger and myself) post on this best in class blog. I have enjoyed coexisting with the tanker folks here at TMT, but cannot offer the amount or quality of information required to fill the void created when we lost our senior editor’s participation. The annalist community has ignored my pleas for access to their reports & data, and without that connection I have not enough to offer the daily TMT readers. I wish you all the best and of course “Good Fortunes” with your investments.
Ski