SOURCE: Five Star Equities

Five Star Equities

February 25, 2013 08:20 ET

Slowing Fleet Growth to See Shipping Rates Rise Sharply Over the Next Few Years

Five Star Equities Provides Stock Research on Frontline and Genco Shipping & Trading

NEW YORK, NY--(Marketwire - Feb 25, 2013) -  The shipping industry has performed admirably to begin 2013 after being plagued by oversupply in 2012. The Guggenheim Shipping ETF (SEA) has gained 4.4 percent year-to-date. Five Star Equities examines the outlook for companies in the Shipping Industry and provides equity research on Frontline Ltd. (NYSE: FRO) and Genco Shipping & Trading Ltd. (NYSE: GNK).

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The Baltic Dry Index (BDI), a measure of costs to ship dry-bulk commodities such as grain, coal and iron ore, in 2012 posted its lowest average in 26 years. The BDI on Friday had a reading of 745, an increase of 16 percent when compared to the 26 year low seen on Feb. 1, 2012, according to data from Bloomberg. RS Platou Markets predicts shipping rates for Capesize vessels will average $11,000 a day in 2013, $19,000 a day in 2014, before nearly tripling to $30,000 by 2015.

"The slowing trend in fleet growth during the course of the year should create some upside potential for improving fundamentals in the second half of 2013," Platou said.

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Shares of Frontline fell sharply last week after announcing results for the fourth quarter and full year 2012. For the fourth quarter of 2012 the company reported a net loss of $16.6 million, equivalent to a loss per share of $0.21. The company warned that if the tanker market does not improve it could have a major impact on its financial situation.

Genco Shipping & Trading Limited transports iron ore, coal, grain, steel products and other drybulk cargoes along worldwide shipping routes. The company reported a net loss of $45.7 million for the fourth quarter of 2012, compared to a net income of $0.3 million in the year ago quarter. Shares of Genco have fallen 20 percent year-to-date.

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