Yesterday's Business Times reported that the Baltic Dry Index (BDI) fell to an 11 month low. Today, it fell another 3.799% to 1,013.
The decline is attributed to a worsening glut of ships. Rates are now below operating costs in the Pacific Ocean.
Capesizes, the largest dry bulk carriers cost US$7,437 a day to operate (excluding fuel). However, rates on round trip voyages in the Pacific fell to US$6,471 a day, down 80% from a month ago.
Seasonal decline in demand to ship commodities to China, port disruptions in Australia after a recent cyclone and a larger number of ships will continue to exert downward pressure on rates in the short run.
My investment in Courage Marine late last year at 10c a share is now underwater. What do I plan to do? Nothing. Why?
Courage Marine is a company with a strong balance sheet and I doubt it is going to sink. It might not do well but it will most probably survive the bad times.
For those who are thinking of possibly investing in Courage Marine, there could be a better time to do so. For those who are already vested, we have to ask if we run the risk of selling at the bottom if we exit now.
With my investment in the company accounting for only some 1.5% of my total portfolio value, I will simply hold on.
Investing in financially sound companies, I am able to stomach paper losses which are likely to be temporary in nature.
Related post:
Courage Marine: Bought more at 10c a share.
Wednesday, 18 January 2012