The Week in Review

While shipping stocks are no longer booming, the underlying shipping markets remain healthy. Jonathan Chappell and his team at JP Morgan are looking for nearrecord tanker rates at the end of 2007 to drive up 1Q08 EPS for tanker stocks and also believe that the tanker spot markets will hold up better than expected going forward. On the dry side, Urs Dür at Lazard sent out a note this week to correct common investor misunderstandings regarding the BDI, noting that it is not correlated to nearterm world trade. He also expects Chinese iron ore price negotiations to be completed by March 2008, which combined with low inventories in China should lead to nearterm improvements for dry bulk freight rates. Omar Nokta and his team at Dahlman Rose note that the tanker market could see some support as AG March cargoes come into the market this week while also observing that the dry bulk market has gained some positive momentum, though this has yet to be reflected in stock prices.

In the S&P market, Compass Maritime reports that the “Wait and See” attitude continues to prevail, particularly in the dry bulk sector, as cash rich buyers and sellers look for a clearer indication of where the market is headed. Of course in all markets China continues to be a significant X factor, and activity during Chinese New Year has been appropriately limited.

On the finance side, talk of the credit crisis has largely given way to discussion of whether a recession is ensuing in the US. Analysts from Deutsche Bank anticipate another $20 billion or so in CDO/sub-prime write-offs, so while not out of the woods yet they anticipate the end of the credit crisis is getting nearer. They report that large bank write-offs in 2H07 now total $140 billion, comprised of approximately 80% in CDO/sub-prime write-downs and 20% in other areas, including leveraged loans and other structured products.

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