We downgrade our recommendation on Excel Maritime (EXM) to Underperform backed by the gloomy near-term prospects of the drybulk shipping industry. This sector is facing serious challenges, where the spot vessel rates collapsed even below the rate during the recession. We believe the sole reason for this dismal condition is the sheer increase of ships under operation that resulted in intense price competition.
The spot rate has fallen to such a low level that even surging commodity prices in the Asian markets failed to offset the loss of the vessel owners. Furthermore, Excel Maritime took a severe hit on its time charter equivalent rate in the last quarter. We believe continuation of this pricing trend may significantly jeopardize the company's future financials.
We do not find any near-term catalyst. Additionally, Excel Maritime is highly leveraged with nearly $1.06 billion of net debt at the end of the first quarter of 2011.
Be the first to comment