NEW YORK, NY -- (Marketwire) -- 06/25/12 -- The Shipping Industry has recently benefited from falling oil prices. Fuel has always been a major cost for shipping companies, and the recent slide in prices have allowed them to operate at more profitable levels. The United States Oil Fund (USO) this year has fallen nearly 23 percent, while the Guggenheim Shipping ETF (SEA) is up over 6 percent over the same period. The Paragon Report examines investing opportunities in the Shipping Industry and provides equity research on Frontline Ltd. (NYSE: FRO) and Genco Shipping & Trading Limited (NYSE: GNK).
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The Baltic Dry Index, which tracks worldwide shipping rates for dry-bulk cargoes such as coal, iron ore and grain, increased for the 7th consecutive day Wednesday. The index jumped 14 points to land at 938 points, while the Baltic's Panamax index gained 1.5 percent to 1,081 points. Although the Shipping Industry has been improving, freight rates are being pressured from growing ship supply.
"Although dry bulk shipping demand is expected to remain firm for the foreseeable future, we also believe the dry bulk shipping market is likely to remain challenging over the next 12 months given the significant number of new projected dry bulk carrier shipyard deliveries," Jefferies analyst Douglas Mavrinac said in a note.
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Frontline has recently agreed with Ship Finance International Limited to terminate the long term charter party for the OBO carrier Front Rider and Ship Finance has simultaneously sold the vessel. Frontline will make a compensation payment to Ship Finance of approximately $0.5 million for the early termination of the charter. The transaction will reduce the company's obligations under capital leases by approximately $2.4 million and the Company expects to record a loss of approximately $5.0 million.
Genco Shipping & Trading Limited is an international ship owning company. The company transports iron ore, coal, grain, steel products and other drybulk cargoes along worldwide shipping routes. For the first quarter of 2012 the company recorded a net loss of $33.1 million. Comparatively, for the three months ended March 31, 2011 net income attributable to Genco was $13.4 million.
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