Diana Shipping Inc. (NYSE:DSX) owns and operates 23 dry bulk shipping vessels with a capacity of about 2.5 million deadweight tons. Diana's fleet is one of the newest in the world, being over nine years younger than the average merchant fleet.[1][2] The company earns its revenues by chartering its vessels to other companies for periods of two to five years for a fixed daily fee. The chartering of these vessels involves the delivery of commodities like iron ore and wheat throughout the world. shipping rates have exploded between 2006 and 2008, causing Diana's net income to rise over 120%.[3] Unfortunately, the 2008 Financial Crisis and ensuing global economic downturn caused rates to plummet. Prices to ship dry goods felly by 90% in 2008, and have remained near multi-year lows through 2011.

Slowing growth in China has damped demand for raw materials. Smaller demand for raw materials means there's less demand for manufactured goods, both of which mean there's fewer things that need to be transported to and from China. Nearly all of Diana's contracts were negotiated before the fall, but by 2009 half of them expired and came up for renegotiation, at which time the company's margins decreased.

Compared to its U.S. competitors, Diana has been growing slowly, focusing on replacing old ships with new ones, rather than just buying up more vessels. That strategy is soon going to become prohibitively expensive as steel prices continue their rapid ascent. Worse yet, shipyards are running a 3 year backlog. Once that backlog clears, the number of dry bulk vessels in operation will have risen approximately 50%. This increases the amount of competition DSX faces in the future.

Company Overview

Diana Shipping has been growing rapidly, in part because the industry as a whole has been expanding, but also because Diana has been able to raise large amounts of capital through frequent equity offerings. Diana buys new or used but young vessels, and then contracts them out to customers for periods of two to five years for a fixed daily fee.

Unlike its younger peers Genco Shipping (GNK) & Eagle Bulk Shipping (EGLE), Diana has followed a conservative approach to expanding its business based on the goal of maintaining a low level of debt. Diana used only a portion of available financing prior to the credit crunch, missing out on the opportunity to expand rapidly, but ensuring that its level of debt was the lowest of its major competitors.

In 2010, Diana had total revenues of $275 million, growing +15% YoY. Operating expenses grew +26.6% YoY, compressing operating and net margins; operating profit grew +7.3% YoY, and net income grew +5.2% YoY.

In 2009, Diana had total revenues of $239 million, a sharp decline from the previous year's revenues of $337.4 million. Unsurprisingly, its net income fell dramatically as well, from $222 million in 2008 to $122 million in 2009 (-45.1% YoY).

In 2008, revenues grew +77.4% YoY to $337.4 million, when shipping rates nearly doubled. Net income rose from $134 million to $222 million about +65.7% YoY.

From 2006 to 2007, Diana's revenues grew 39%,[2] and its net income rose 120%.[2]

Key Trends and Forces

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Rapid Shipbuilding Will Create An Oversupply Of Dry Bulk Vessels

There were contract orders for the construction of enough ships to increase the size of the worldwide fleet of dry bulk vessels by 57% within the next 3 years, excluding ship retirements.[4] While there was disagreement in the industry over whether demand would keep pace, with world economic growth slowing down, there is little doubt that if all new shipbuilding orders were completed there would be an oversupply. However, according to Pacific Basin Shipping Limited, a dry bulk shipper, shipyards won’t be able to complete all of their orders on time.[5] Furthermore, many dry bulk shipping companies make orders or purchase options to buy new ships with the expectation that they will be able to find financing later. They will be able to find financing, but its going to be much more expensive than it was a couple years ago. Every day that the cash squeeze continues lowers the likelihood of an oversupply developing.


Diana Shipping has the youngest fleet out of its major competition listed on the NYSE. A young fleet is less expensive to maintain, is equipped with more fuel efficient engines, is safer, will get better cargo insurance rates, and is more attractive to potential customers.[6] However, acquiring a young fleet is expensive, especially given the current climate of tight credit and rising shipbuilding costs. Some of DSX's major competitors include DryShips (DRYS), Eagle Bulk Shipping (EGLE), Genco Shipping (GNK), and Navios Maritime Holdings (NM).


  1. 2.0 2.1 2.2
  2. DSX 20-F 2009 Item 3 Pg. 4
  3. 2007 EGLE 10-K, Item 1, Page 21
  4. Pacific Basin Shipping Limited – Q1 2008 Trading Activities Update
  5. 2007 DSX, 20-F, Item 3, Page 16
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