Shipping Stocks Rise As Baltic Dry Index Hits 4-Year High

Dry shipping stocks TOP SHIPS Inc TOPS, Euroseas Ltd. ESEA and DryShips Inc. DRYS are all trading higher Thursday as the Baltic Dry Shipping Index hits its highest level in four years.

What You Need To Know

Why It's Important

What’s Next?

After bottoming in early 2016, the BDI has been steadily climbing ever since, recently topping 1,500 for the first time since 2014.

The BDI is a measure of daily charter rates for a range of dry bulk shipping carrier sizes, including handysize, supramax, panamax and capesize. These dry bulk carriers carry raw materials, such as coal and iron ore, overseas. The BDI itself is not a security that traders can buy or sell on the market, but it is a bellwether for what traders can expect from shipping stocks.

The shipping industry completely collapsed in 2015 and 2016, sending benchmark shipping rates down 98 percent and the share prices of shipping stocks down even more. But the companies that have survived the downturn have been adding assets on the cheap and preparing for what could be a cyclical rebound. If dry bulk shipping stocks ultimately recover the same way oil tanker stocks did in the late 1990s following a similar downturn, there could be some huge returns ahead in the next five to seven years.

After years of massive dilution and reverse stock splits among dry bulk shipping stocks, investors would be justified in being slow to trust these companies for quite some time.

At the time of publication, Top Ships was up 22 percent to $0.45; Euroseas was up 2.40 percent to $1.84; and DryShips was up 2.34 percent to $3.94.

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