On Monday, equity analyst Justin Yagerman upgraded shares of Greek bulker owner Diana Shipping and raised his price target to $15.00, which represents an increase of $2.00.

“We feel the company has meaningful upside potential given its combination of solid 2014 contract coverage, combined with exposure to an improving market through the re-chartering of current vessels and acquisitions,” he told clients in a morning market briefing.

“Diana Shipping has a significant cash balance of $315.7m as of [30 September 2013] and expects to increase its debt leverage ratio to up to 50% (compared to sub-30% in the third quarter of 2013) in order to fund fleet growth.”

Yagerman said “a basket” that includes shares of Diana and Scorpio Bulkers, which completed a New York listing just last month, is “an optimal way to play the expected improvement in the dry-bulk market" since the former can provide downside protection to rate volatility.

“Diana Shipping has contract coverage of at least 62% in 2014 (assuming no charterer extensions), which provides the company with assured cash flows while leaving an opportunity to re-charter vessels into a strengthening rate environment,” the researcher added.

In the minutes leading up to the lunch hour New York-quoted shares of Diana Shipping (DSX) rose 0.33% to $12.22, which is well above a 52-week low of $8.24 but still shy of  a $13.93 high, while Scorpio Bulkers (SALT) watched its US-listed stock slip 0.51% to $9.85.

Cape rates crash

The Baltic Dry Index (BDI) slipped 7.7% to 1,395 Monday as freight rates fell in nearly all of the sub-segments of the dry-bulk market with the exception of supramaxes, which saw daily levels remain unchanged at around $12,400, according to the Baltic Exchange.

Capesize bulkers experienced the most significant decline after plunging 22.3% to $13,600, which represents a loss of more than 50% when compared to day rate averages recorded seven days ago, according to a daily market update issued by Global Hunter Securities.

While many believe the dip is due to the approach of the Chinese New Year, which begins on 31 January and ends a week later, Jeffrey Landsberg of Commodore Research claims the large stockpiles of iron ore at Chinese ports and steel mills are to blame.

While Landsberg admits that Chinese chartering activity tends to be very low during the Lunar New Year holiday he was quick to point out that demand for iron ore cargoes in the weeks leading up to the celebration have actually been quite robust in recent years.

“Last year, for example (which saw China’s week-long Lunar New Year celebration begin on 10 February) saw a robust 29 vessels chartered to haul imported iron ore to Chinese buyers during the week ending 8 February 2013,” he explained.

Landsberg says weather disruptions in places like South America and Australia, the Indonesian ban on unprocessed mineral exports and other factors like the suspension of Colombian coal shipments from Drummond, the world’s fourth largest exporter, are also to blame for the lull in activity.