Tim Huxley on Forbes explains that this is the largest threat to the health of the shipping industry. Big state owned ship building yards are simply not profitable and the new supply of ships being built is larger than the demand for them.
iShares Dow Jones Transportation (NYSEArca: IYT) and Guggenheim Shipping (NYSEArca: SEA) have dipped in recent weeks – 1.6% and 2.2% in the last 10 days, respectively. Whether they can turn it around really depends on whether demand for those ships increases, which could happen as the recovery progresses.
For full disclosure, Tom Lydon’s clients own shares of IYT.
Tisha Guerrero contributed to this article.