Good Time to Buy a 'Little' Shipping

Within the last two weeks, both TheStreet.Com and Motley Fool have come out with articles recommending the purchase of shipping stocks. The recent surge in the Baltic Dry Index is certainly an excellent reason. Since the low of this year, the BCI has surged from around $80,000 to $230,000+. The BPI has surged from around $40,000 to $80,000+. The BSI has surged from around $40,000 to $66,000+. The BCI has surpassed its 2007 high. The BPI and the BSI are nearing their 2007 highs. The shipping stocks are still significantly below their 2007 highs. The experts are predicting the Baltic Dry indices are going to go significantly higher this year.

Still there are more reasons. Due to the credit crunch, the shipyards have cut back on building, as both they and the buyers are having a harder time getting credit. This situation should lessen the competition in the shipping industry over the near term. It should further drive up prices. China and India still have the huge demand for raw materials that generally have to come in by ship. In addition, the recent earthquake in China damaged the some of the rail lines there. A good portion of the freight that used to move by rail in China will have to move by ship temporarily. This should further push prices up, especially for the smaller vessels, which will likely be used to move the materials along the Chinese seacoast.