Deutsche Bank Bullish on Dry Bulk Recovery Starting in November

Deutsche Bank has offered a surprisingly upbeat outlook for dry bulk

Deutsche Bank has offered a surprisingly upbeat outlook for dry bulk, and says it expects a spot rate spike in November and December to pave the way for the sector to enjoy a strong 2016, Tradewinds reports.

"We spent last week in Asia, meeting with shipping companies and investors in Hong Kong, Beijing, Shanghai, and Singapore,” analyst Amit Mehrotra was quoted by Tradewinds as saying.

"Our takeaways support our contrarian view on the sector, which calls for strong outperformance in dry bulk equities starting in 2016."

If the rebound happens, it would put an end to what J. Lauritzen last month described as the weakest dry cargo markets for the last 30 years, a situation that earlier this year saw Scorpio Bulkers Inc. (Scorpio Bulkers) declare they had made mistakes and would "have to face the music."

However Scorpio Bulkers, along with Diana Shipping, are now being tipped by Mehrotra, who was speaking last week at Marine Money in Singapore, as potentially good long-term stock buys that could double their value in the next 12 to 18 months, albeit in the case of Scorpio Bulkers that was "not saying much given it's at $1.60 today."

The view is in deep contrast to majority consensus, with a Platts survey last month indicating more than half of respondents thought a recovery for the sector was at least three years away.

Braemar ACM shipping analyst Peter Malpas in June said there was "no doubt we have at least two and a half years of pain in the dry bulk sector," and Drewry Shipping Consultants Ltd (Drewry) earlier this month said that, despite a few glimmers of hope, any relief for the sector is still a "long way off."

The sector's troubles are being closely monitored by bunker players, as credit managers look to separate rumour from reality on the financial health of potential customers, leading some operators such as Japan-based Daiichi Chuo to publicly declare it is not close to bankruptcy.

In the event Mehrotra is wrong over an imminent recovery, bunker companies have been given good reason to be cautious.

Last month, J. Lauritzen president and CEO Jan Kastrup-Nielsen said that "if the dry bulk market is low for a sufficiently long period of time, then there will be no dry bulk carriers left: it's as simple as that."