Covid-era shipping stocks: the (super) good, the bad and the ugly
Shipping stocks have never been for the faint of heart, and they’ve been on a particularly wild ride in the COVID era.
There have been steep plunges and historic surges along the way, with unexpected twists and turns. What could be around the corner?
U.S.-listed equities in the three main segments — tankers, containers and dry bulk — are following different patterns. To put these shipping stock moves in context, from the onset of COVID until Thursday, American Shipper spoke in depth with Evercore ISI analyst Jon Chappell and Jefferies analyst Randy Giveans.
Predictably, shipping stocks were down big across all sectors in Q1 2020, at the onset of the pandemic.
Amid initial fears that container lines could lose billions (the exact opposite of what happened), shares of container-ship lessors fell: Danaos plunged 75 percent from a high of $9.84 in January 2020 to a low of $2.50 two months later. It was still trading under $4 at the end of June. Dry bulk stocks also sank in the first half of 2020, albeit less than containers. Star Bulk fell 67 percent from a high of $11.81 in January to low of $3.95 in May, then rose back to $6.60 by the end of June.
The real action in the early days of COVID came from trading tanker stocks.
[divider style=”normal” top=”20″ bottom=”20″]
Baltic index gains as capesizes, supramaxes hit over 1-month highs
The Baltic Exchange’s dry bulk sea freight index advanced on Wednesday, steered by gains in the capesize and supramax vessel segments.
The overall index, which factors in rates for capesize, panamax and supramax vessels, gained 71 points, or 2.1 percent, to 3,423, touching its highest level since Nov. 1.
The dry bulk market is mainly iron ore and coal driven at this point, with higher momentum in the Atlantic on relative vessels’ supply tightness, shipbroker Intermodal said in a weekly note dated Tuesday.
The capesize index advanced 206 points, or 4.1 percent, to 5,189, its highest level in a month-and-a-half.
Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, increased by $1,706 to $43,030.
Chinese stainless steel futures dropped to their lowest in more than three months, dented by sluggish downstream demand and easing raw material prices.
The panamax index shed 32 points, or 1 percent, to 3,221, snapping a 12-session winning streak.
Average daily earnings for panamaxes, which carry 60,000-70,000 tonne coal or grain cargoes, decreased by $283 to $28,992.
The supramax index rose 32 points to 2,520, a peak since Nov. 4.
[divider style=”normal” top=”20″ bottom=”20″]
Asian fuel oil VLSFO refining margins, cash premiums slip
Meanwhile, Asia’s front-month crack for 0.5 percent very low-sulphur fuel oil (VLSFO) slipped on Wednesday, but traders claim steady bunkering demand and restricted arbitrage arrivals from the West will continue to help the market in the near future.
The front-month VLSFO crack downed to $13.05 per barrel against Dubai crude during Asian trading hours, compared to $13.47 per barrel on Tuesday.
“While bunker demand in Singapore is largely expected to remain bolstered till the year-end, some shipowners may hold back from huge purchases owing to expensive premiums for prompt dates and rising flat prices for crude,” according to Refinitiv Oil Research research findings.
On Wednesday, cash premiums for Asia’s 0.5 percent VLSFO, which have risen 31 percent in the last two weeks, were $16.24 per tonne to Singapore quotes, and they were $17.90 per tonne a day earlier.
[divider style=”normal” top=”20″ bottom=”20″]
Ocean shipping lobby grilled on carrier profits
After hearing testimony from fellow witnesses on how jammed supply chains and exorbitant shipping charges are hammering their businesses, World Shipping Council President and CEO John Butler was asked how some of his ocean carrier members can justify their best financial quarter in decades.
“The price situation right now is entirely unfamiliar to us,” Butler acknowledged during a Senate Commerce Committee hearing on Tuesday. “For the last 20 years, the ocean shipping business has been lucky to make its cost of capital. And what we’re facing is completely unprecedented.”
However, as Butler has asserted all during the supply chain crisis, the disruptions are purely the result of supply and demand in the market. In addition, much of the “headline” rates — the container rates many times what they were a year ago that grab the headlines — are in the spot market. Pricing under long-term service contracts between the ocean carriers and their customers has not gone up nearly as much as rates obtained to move a container next week, he said.
[divider style=”normal” top=”20″ bottom=”20″]
Winter storms hamper Russian oil exports from Black Sea Ports, raise costs
Early winter storms in southern Russia are hampering oil operations in Black Sea ports, traders said on Wednesday, delaying cargoes and increasing costs.
Bad weather has been hammering the Black Sea oil export centres since November, with Novorossiisk oil terminal, which loads Urals crude, and Yuzhnaya Ozereyevka, which loads CPC Blend, most affected, said traders.
“Weather conditions in Novorossiisk are terrible. Nearly every cargo loading has been delayed”, a trading source working with the port said.
Russian oil pipeline operator Transneft, which controls the Novorossiisk port, didn’t respond to Reuters request for comment. The Caspian Pipeline Consortium, operating the terminal at Yuzhnaya Ozereyevka, declined to comment.
Storms delayed some 300,000 tonnes of Urals and Siberian Light from the Novorossiisk loading schedule for November to December, traders familiar with the port operations said.
Novorossiisk loadings are currently from one to five days behind schedule, the trading source working with the port said.
Long queues of tankers in the Black Sea straits – the Bosphorus and Dardanelles – have made the situation worse, with ships stuck in the waterways leading to the Mediterranean Sea.