- The intensifying Red Sea crisis and broader Middle East turmoil are causing prolonged disruptions in the shipping industry.
- Recent incidents, such as a ballistic missile hitting the JP Morgan-owned product tanker Marlin Luanda, have heightened concerns.
- According to Jefferies shipping analyst Omar Nokta, Red Sea diversions are on the rise, affecting the transits of vessels, particularly impacting crude and product tanker shipments.
- Deutsche Bank analysts predict a surge in ship diversions, potentially resulting in higher spot rates.
- Shipping stocks, particularly those associated with mid-sized crude and product tanker segments, could benefit, with companies like Frontline, International Seaways, and Scorpio Tankers highlighted.
Impact of Red Sea Crisis on Shipping
Ongoing attacks on vessels in the Red Sea region are compelling shipping companies to opt for more diversions, affecting the transits of crude and product tankers. Notably, crude tanker transits have seen a 22% decline, while product tanker transits have dropped by 51%. LNG carrier transits are down 87%, and LPG carrier transits have decreased by 62%.
Positive Outlook for Zim
Jefferies shipping analyst Omar Nokta significantly revises his perspective on Israeli container liner operator Zim, stating that Houthi attacks have transformed Zim’s business trajectory from a “cash burn” scenario to a “cash machine.” Nokta’s updated forecast indicates a projected adjusted net income of $751 million for Zim this year.
Tanker Equities Under Spotlight:
Evercore ISI shipping analyst Jonathan Chappell suggests that tanker equities should be closely considered amid heightened geopolitical risks. Chappell notes that shipping stocks often exhibit material beta during periods of conflict. Deutsche Bank analysts anticipate an increase in ship diversions, potentially benefiting companies with exposure to mid-sized crude and product tanker segments.
Impact on Ship Owners and Operators
Analysts foresee a rise in ship diversions due to recent attacks, exerting upward pressure on spot rates. Companies with exposure to mid-sized crude and product tanker segments, such as Frontline, International Seaways, and Scorpio Tankers, are positioned to gain from the disruptions.
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Source: Telegraph
