- This should not be surprising given the strength in consumer spending and e-commerce.
- It should not come as a shock that tanker and dry bulk [stocks] are down, given that demand for the products they carry is down and consequently so are freight rates.
- In dry bulk, shipping equities are universally lower, [but] iron-ore mining companies are up 42% year-to-date and the S&P materials index is up 16%.
- Two main factors drive the stocks of container-ship owners that rent vessels to liners: counterparty risk and charter rates.
- Container liners are doing even better than ship lessors.
A recent news article published in Freight Waves, written by Greg Miller reveals the Q3 stock status with regard to various shipping lines. Liner stocks up 53% YTD, box-ship lessors 16%. Crude tankers down 39%, product tankers 53%, dry bulk 32%.
Container shipping stocks on the ascent
Two main factors drive the stocks of container-ship owners that rent vessels to liners: counterparty risk and charter rates.
With the trans-Pacific and other trade lanes booming, the counterparty risk that spiked back in March is now completely off the table. Meanwhile, charter rates are at decade highs and still rising.
Larger ship lessors
Among the larger ship lessors, Atlas (owner of Seaspan, NYSE: ATCO) reported Q3 2020 net income of $84.1 million, Danaos (NYSE: DAC) $42.8 million, Costamare (NYSE: CMRE) $25.2 million and Global Ship Lease (NYSE: GSL) $13.6 million.
Charter deals
As existing charter deals expire, these owners are rebooking vessels at much higher rates. Their stocks are now back to pre-COVID levels or better. Danaos’ stock is back to levels last seen in March 2019. GSL is back up to levels last seen in August 2018.
Container liners
Container liners are doing even better than ship lessors. The only U.S.-listed liner, Matson (NYSE: MATX), is by far the biggest winner in America’s public shipping arena. It posted Q3 2020 net income of $70.9 million. Its stock is up 50% year-to-date, to the highest level since the company was spun off from Alexander & Baldwin back in 2011.
Non-U.S.-listed liners
Among the non-U.S.-listed liners, Denmark’s Maersk, Germany’s Hapag-Lloyd and France’s CMA CGM all posted big third-quarter numbers.
But the most important revelation by liners during Q3 calls was not about profits. It was about forward container-transport demand.
Importantly, Matson, Maersk, Hapag-Lloyd and CMA CGM all cited continued demand strength through Q4.
Tanker shipping stocks languish
Among the largest crude, products and mixed-fleet tanker owners, Frontline (NYSE: FRO) posted Q3 2020 net income of $57.1 million, DHT (NYSE: DHT) $50.7 million, and Euronav (NYSE: EURN) $46.2 million.
Not everyone was in the black, however. Scorpio Tankers (NYSE: STNG) reported a net loss of $20 million, Nordic American Tankers (NYSE: NAT) $10 million and Diamond S (NYSE: DSSI) $9.7 million.
Profits for every tanker companies
Even stocks of tanker companies that reported big profits aren’t faring well. Tanker equities are down significantly year-to-date. Investors are focused on forward rates — which are very low — not the prior quarter’s earnings.
The most valuable comments from tanker owners’ Q3 2020 conference calls related to forward demand and the fate of the floating storage overhang. Until floating storage is drawn down, demand for transport will be muted.
The reason: foating cargoes are already in position. Executive commentary was generally not positive. Hopes for the traditional winter demand boost are low. Executives expect the floating-storage overhang to be lengthy.
NAT reduced its dividend
Dividends are another key quarterly-results focus of investors. NAT reduced its dividend to 4 cents a share from 20 cents the previous quarter. Navios Acquisition (NASDAQ: NNA) slashed its dividend to 5 cents a share from 30 cents the previous quarter. On the day of the dividend announcement, Navios Acquisition’s share price plunged 15%.
In general, the big 2020 loser among tanker names with larger market caps is Scorpio Tankers, led by the management team of CEO Emanuele Lauro and President Robert Bugbee. Scorpio Tankers’ stock price is down 68% year-to-date.
Seasonally weak Q1 ahead
For dry bulk shipping stocks, 2020 has been yet another year to forget. Rates have been generally weak, with little in the way of material upside catalysts.
Larger bulk-fleet owners
Among the larger bulk-fleet owners, Golden Ocean (NASDAQ: GOGL) reported Q2 2020 net income of $39.1 million, Star Bulk (NYSE: SBLK) $23.3 million and Safe Bulkers (NYSE: SB) $3.3 million.
On the red side of the ledger, Genco Shipping & Trading (NYSE: GNK) reported a loss of $21.1 million, Diana Shipping (NYSE: DSX) $13.2 million and Eagle Bulk (NASDAQ: EGLE) $11.2 million.
A formerly major player, Scorpio Bulkers (NYSE: SALT), is in the process of divesting its entire dry-cargo fleet and refocusing on wind-farm equipment carriers. It posted a net loss of $36.6 million in the third quarter.
Larger Capesize-class bulkers
For owners of larger Capesize-class bulkers, a big drag this year has been tepid iron-ore volumes from Brazil to China.
Weak output of Brazilian miner Vale (NYSE: VALE) is to blame. Vale disappointed the marketplace once more last week when it lowered its full-year 2020 production forecast yet again.
The first quarter of each year is traditionally the weakest period for dry bulk demand, so there’s little in the coming months to energize the U.S.-listed dry bulk shipping stocks, all of which are down substantially this year.
The biggest loser by far in the sector is Scorpio Bulkers. Its stock is down 74% year-to-date — even more than the Lauro-Bugbee management team’s loss on the product-tanker front.
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Source: Freight Waves
