STX PO

STX PO: Key takeaways from DB's China conference that concluded yesterday is supportive of DB's investment thesis for the dry bulk shipping sector. Demand recovery is seen in China, with coal demand expected to grow 6% in 2013, up from 3% in 2012. This is driven by higher economic activity. CoalWorld.net forecasts coal imports into China to grow 10-20% in 2013. China Cosco, the key bulk player in China, drawing from its experience thinks that the BDI currently at the 760 level, is expected to normalize as the low rates are not sustainable. The positive signs in the dry bulk industry which may indicate a recovery is forthcoming: (1) steel production in China recovering, (2) small shipyards and dry bulk shipping companies going bankrupt, (3) scrapping hitting historical highs, and (4) much less newbuild orders over recent years. DB has a BUY on STX PO with a TP of $6.71, currently trading at an attractive valuation 0.6x 2013E P/B.