Safe Bulkers stock recovery stalls as commodity prices sink

By:
on Apr 10, 2023
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  • Safe Bulkers share price has been in a slow bullish trend.
  • There are concerns that the company’s growth will slow this year.
  • The prices of key commodities is expected to continue falling.

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Safe Bulkers (NYSE: SB) stock price has done well in 2023 even as the shipping industry goes through a difficult period as prices drop. The stock has jumped by more than 25% this year and is hovering near the highest point since August last year. It has also jumped by over 55% from its lowest point in 2022, meaning it has outperformed peer companies like Diana Shipping, Eagle Bulk Shipping, and Eneti.

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Shipping struggles continue

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Safe Bulkers is a leading company in the shipping industry. The company has 44 vessels, which are composed of 12 Panamax, 7 kamsarmax, 17 post-panamax, and 8 capesize. It has ordered 9 more ships. 

Safebulkers focuses on carrying bulk commodities like coal, grain, and iron ore among others. Therefore, the company does well when commodities are rising because it implies more pricing power and demand. 

Recently, however, the prices of key commodities that the company deals with has been on a downward trend as demand remains low globally. Analysts believe that iron ore prices will remain under pressure as demand eases. In a report last week, analysts at Morgan Stanley said that iron ore prices will drop to about $90, which is lower than the current $128.

Grain prices have also retreated. For example, wheat prices have dropped by ~30% from the highest point in 2022, as I wrote here. The same is true for other grains like soybeans and corn. Other bulk commodities like lithium and nickel have also dropped.

It is also worth noting that other parts of the shipping industry have pulled back in the past few months. For example, the Drewry’s composite World Container Index has plunged to $1,709.76 per 40 ft container. In April 2021, the amount was over $8,000.

World Containers Index
World Containers Index

Therefore, there is a likelihood that Safe Bulker’s revenue growth will slow this year. In 2022, the company’s revenue came in at $349 million, up from the previous $329 million. Analysts believe that the company’s revenue will drop to $319 million this year and then bounce back to $354 million in 2024. The company’s EPS is expected to come in at $0.97, down from $1.35 in 2022.

Safe Bulkers stock price forecast

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Safe Bulkers stock price

SB chart by TradingView

The 4H chart shows that the SB share price has been in a bullish trend in the past few days. The stock has managed to move comfortably above the 38.2% Fibonacci Retracement level. It has formed an ascending channel that is shown in black.

Safe Bulkers share price has also moved above the 50-period moving average while the Relative Strength Index (RSI) has moved below the neutral point at 50. Therefore, there is a likelihood that the stock will remain in this range in the coming days and then retest the lower side of the channel at $3.40.

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