Shipping equities had a strong performance in the first two months of 2023, outperforming major stock market indexes. However, since March 1, they have been underperforming, raising concerns about the future of trade flows. This has led investors and traders to question whether the decline in shipping stocks is a warning sign for the global economy or an opportunity to buy at a lower price, as reported by Freight Waves.
Container shipping stocks
Despite the container shipping industry having unfavourable supply-demand fundamentals due to a large orderbook, container shipping stocks had a strong start in 2023. However, they have recently experienced a sell-off, performing worse than the stock market indexes. Several container shipping indicators have improved since March, such as spot freight rates and U.S. imports returning to or surpassing pre-COVID levels. Additionally, container-ship charter rates and asset values have surprised to the upside. The Harpex Index, which measures charter rates, has rebounded since March. Nonetheless, container shipping stocks, including Maersk, Zim, Global Ship Lease, and Danaos, have seen declines in their share prices during this period.
Dry bulk shipping stocks
The dry bulk shipping industry faced a significant downturn in freight rates at the beginning of 2023, with the Baltic Dry Index (BDI) dropping by over 90% between October and mid-February. Despite this, dry bulk stocks initially increased as investors expected a typical post-low-season rate rebound. Companies like Eagle Bulk, Star Bulk, Genco Shipping & Trading, and Golden Ocean saw substantial gains in their share prices during the first two months of the year. However, dry bulk market indicators have shown improvement since March, with spot rates for Capesizes reaching a yearly high and asset values experiencing positive growth. Nevertheless, dry bulk shares have been declining, largely influenced by concerns over China’s post-COVID recovery. Shares of Eagle Bulk, Genco, Star Bulk, and Golden Ocean have experienced significant decreases since March 1.
Tankers stocks
In early 2023, tanker stocks experienced a surge in value due to high spot rates, rising asset prices, and a low orderbook. Companies like Teekay Tankers, Frontline, Nordic American Tankers, and DHT saw significant increases in their share prices during the first two months of the year. However, the positive momentum shifted as spot rates started to decline in March. The announcement of an unexpected production cut by OPEC+ further impacted the tanker industry, leading to falling crude pricing and tightening refinery margins. As a result, tanker stocks experienced declines. Despite this, analysts believe that the concerns surrounding the industry are largely misplaced. They argue that even in a worst-case scenario, the tanker market has the potential for a quick and meaningful recovery due to the limited fleet growth caused by the low orderbook. Some analysts suggest that now is an opportune time to buy shipping equities from pessimistic investors.
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Source: Freight Waves
