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Oceanic Shipping Stocks
A very big amount of oceanic shipping companies went public in 2005 when the oceanic transportation market was at peak levels. From that time on, shipping freight rates, and consequently shipping stock prices, have declined considerably. As their stock prices have declined, many of these companies have lost market capitalization value to a point that classifies them as microcap stocks.
Oceanic shipping stocks are inclined to fluctuate in value according to an arrangement of the supply and demand for shipped goods and the availability of vessel tonnage as a sector. When the demand for the shipment of goods exceeds accessible vessel tonnage, freight rates augment, and as anyone would expect, shipping companies characteristically enjoy augmented earnings. An additional benefit of this situation is the appreciation in vessel valuation as many shipping companies increase their bottom line through the sale of older vessels in their fleet.
A shortage of vessel tonnage characteristically lasts for a few years due to the fact that ship building is a slow procedure. Ship construction and subsequent sea trials typically takes a few years, unlike the production of an automobile which can be accomplished in as little as a couple months. The augmented demand and escalated vessel valuation seen during vessel tonnage shortages frequently lead to an overproduction of oceanic transports as shipbuilders endeavor to cash in on the hot market. An excess of new vessels causes the supply of available vessel tonnage to acutely outpace the demand for the shipment of goods upon completion of these ships. As such, freight rates diminish as the market attempts to correct itself. Up to date research shows that worldwide demand for vessel tonnage characteristically increases at a rate of 4% per year. Vessel tonnage may increase by as much as 10% per year during times of increased shipbuilding. It does not take a genius to notice that there is an inconsistency here. Demand for new vessel tonnage would equal actual new vessel tonnage production in an ideal world. Apparently, this does not happen.