The dry bulk shipping business is one of the three main sub-industries under maritime transportation, used to carry dry bulks over water. These dry bulks can be broken down into major and minor bulks. Major bulks consist of iron ore, coal, and grains, while minor bulks include commodities such as cement, bauxite, nickel ore, forest products, and steel products.

Main fleet classes

The main classes of dry bulk vessels that investors need to know are Capesize, Panamax, and Ultramax or Supramax vessels. Depending on the volume, trade routes, and limitations of ports, different classes of vessels are used to transport specific commodities.

• Capesize, the largest vessel class, is primarily used to carry iron ore and coal from Australia and Brazil to China, as its size makes it more economical to transport large cargo over long distances.

• Panamax, which comes next, is used to carry iron ore, coal, and grain. Panamax vessels got their name because they can pass through the Panama Canal, which allows vessels to move from the Atlantic Ocean (east of the Americas) to the Pacific Ocean (west of the Americas).

• Smaller-class vessels such as Ultramax and Supramax are primarily employed to haul grains and minor bulks.

2014 2H outlook

Since outperforming major indexes in 2013, dry bulk shippers such as DryShips (DRYS), Diana Shipping (DSX), Navios Maritime Holdings (NM), and Safe Bulkers (SB) have pulled back. Despite this weakness, the Guggenheim Shipping ETF (SEA), which invests in large international shipping companies, has climbed higher.

In this series, we’ll cover key trends and drivers that are affecting these companies and, consequently, what might be in store for the dry bulk shipping industry for the remainder of 2014.