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Shipping Revisited: The Good, The Bad, & The Ugly

This is a follow-up on the article written in March. I decided to follow that thread, and see where it led. On the surface, shipping companies make for great bargains. Eagle Bulk was one of them, selling at less than book. Below, I've outlined how industry characteristics and risks can heavily influence an investment decision for an individual company.

The Good:
The shipping industry has been plagued by over-ordering for over a decade. The IMO's new global sulphur cap (to be introduced in Jan 2020), will act to eliminate older tonnage. How? By 2020, it is estimated that around 3% of the global fleet will have scrubbers. This means 3% of the global fleet will be off-hire between now and then. The majority of those are still waiting to get their exhaust gas cleaning units installed, causing a restriction in supply. The regulation will also impact the demand side.  Because the spread between high sulphur fuel and low sulphur may most likely widen in the future, vessels fitted with…

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