Dry Bulk CEO Warns Of Coming Bankrupcies

Golden Ocean Group Ltd GOGL CEO Herman Billung painted a bleak outlook picture for shareholders at an industry conference this week. According to Billung, the bottom may soon fall out of the dry shipping space.

“The market has never been this bad before in modern history. We haven’t seen a market this bad since the Viking age,” Billung joked. “This is not sustainable and will lead to dramatic changes.”

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He added that the first major change will be a wave of industry bankruptcies that will make counterparty risk a top concern. How bad will it get? Incredibly, Billung estimates that only about half of the 2016 orderbook will be delivered.

To nobody’s surprise, Billung claims that Golden Ocean Group is the best investment in dry bulk shipping today and praised Hemen Holding as the company’s biggest advantage. “We are there for the long term and have a main sponsor who is strongly committed to the company and the industry,” he said of Hemen.

If things get as bad for dry shippers as Billung expects, the pressure could soon spread to banks that have loan exposure to failing shipping companies.

So far this year, Golden Ocean’s stock is down 34.6 percent. The Guggenheim Shipping ETF SEA is also down 8.6 percent in 2016.

Disclosure: the author holds no position in the stocks mentioned.