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SEA keeps sinking and airlines look nearly as vulnerable (FAA, CEA, TAM)

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The shipping industry exchange-traded fund, Claymore/Delta Global Shipping ( SEA , quote ), continues to sink, but rising fuel costs are also taking their toll on airline operators.

The Claymore/Delta Global Shipping ETF is down almost 3% for the week, almost 7% for the month, more than 15% for the quarter and over 46% for the year.

Do not expect 2012 to be any better. Shipping companies are cutting the lucrative Europe-Asia route to a drop off in cargo and fuel costs are likely to rise for 2012, according to Goldman Sachs.

Both China and India are reporting and projecting lower economic growth, which will cut into demand for shipping.

JPMorgan and Morgan Stanley have called for lower demand for natural resources, which will be devastating as a huge portion of shipping is the iron ore trade to China.

As it is, the short float on SEA has climbed to 8.84%.

On the air side, fuel costs are already biting into Guggenheim Airline ( FAA , quote ), the exchange-traded fund for the U.S. airline industry.

For the year, FAA is off by more than 30%. If oil prices rise, as predicted by Goldman Sachs, it will be devastating to the airline industry since fuel accounts for about 40% of operating costs.

Tough economic times pulled the last legacy carrier in the U.S., American Airlines ( AMR , quote ) into bankruptcy court.

The Indian airline industry is in particularly bad shape and north of the Himalayas, China Eastern Airlines ( CEA , quote ) is down by more than 30% year to date.

Brazil's leading air carrier, TAM SA ( TAM , quote ), has fallen almost 20% year to date.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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