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What's Behind the Smooth Sailing of the Top ETF of 2021?

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Breakwave Dry Bulk Shipping ETF (BDRY - Free Report) , which is the only freight futures ETF exclusively focused on dry bulk shipping, is the top-performing ETF of this year so far, having gained more than 300%.

The astounding rally has been driven by the booming dry bulk shipping industry, which is enjoying a smooth sailing due to supply chain disruptions around the world caused by the pandemic. In fact, the bulk shipping rates are hovering at around a decade high. Port congestion and delays are the primary drivers as the pandemic has halted the movement of ships and will continue to do so at least in the near term.

This is because the surging Delta variant of COVID-19 has made congestion even stronger with many more precautionary measures recently put in place for ships entering China. The China congestion issue is affecting all ship sizes from capes to handies, leading to limited port activity and the pile-up of agricultural cargoes. Notably, China dominates the dry bulk market with about 40% of total major dry bulk goods trade.

Additionally, the recent uptick in iron ore shipments could trigger an increase in the volume of Cape arrivals in China over the next few weeks, sustaining queues further. Decrease in container availability has also been supporting the high bulk rates (read: This Multibagger ETF Still Looks Like a Buy: Here's Why).

With the reopening of the economies following the ease of pandemic restrictions and supply chain disruptions, demand for dry vessel has increased, leading to a spike in prices. The dry bulk market includes iron ore, coal, grains, oilseeds, steel, cement, forest products, agricultural products, non-ferrous minerals, and metals. The Baltic Dry Index, which tracks rates for vessels that carry dry bulk commodities, has climbed about 68% over the past year.

As most of the major commodities are transported by ships, the outlook for the global shipping industry remains strong for the rest of this year. Accelerating economic growth backed by rapid vaccinations and easy money policies, higher urbanization, rising steel production, and growing coal industry bode well for the dry bulk shipping market.

Per the report, the global dry bulk shipping market is projected to witness a CAGR of 2.6% to reach $5066.3 million by 2026 from $4213.8 Million in 2019. The global dry bulk shipping market is set to expand at a CAGR of 5.10% over the forecast period (2020-2027), according to Market Research Future (read: all the Industrial ETFs here).

Let’s take a closer look at the fundamentals of BDRY.

BDRY in Focus

This fund provides exposure to the dry bulk shipping market through a portfolio of near-dated freight futures contracts on dry bulk indices. It holds freight futures with a weighted average of approximately three months to expiration, using a mix of one-to-six-month freight futures, based on the prevailing calendar schedule. This approach reduces the effects of rolling contracts by using a laddered strategy to buy contracts. The freight futures allocation will be 50% Capesize contracts, 40% Panamax contracts, and 10% Supramax contracts (read: 5 ETF Areas Stood Strong Amid Last Week's Market Carnage).

The fund has accumulated about $93.3 million in AUM and trades in a good volume of about 169,000 shares per day on average. It charges a higher annual fee of 3.32%.


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