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Maritime Financial Research


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Maritime Financial Insight - Jan 21

January 2021

  • Container shipping: The year 2020 was full of highs and lows for liner operators marked by a significant swing in fortunes. While carriers struggled in the first half not knowing how to deal with COVID-19 led downturn, in the second half, carrier conditions were boosted by sustained capacity discipline. By the end of the year, the idle capacity as a percent of the total fleet was down to 3.2% - a significant fall from 9.8% in June, reflecting the intense demand for tonnage. A key takeaway for carriers from last year is the lesson that it is more profitable to curb capacity than add capacity, which has been the norm over the last 15-20 years. Meanwhile, spot freight rates went through the roof which was mirrored by stock prices. Ironically, despite the fears of a market collapse due to the pandemic, the year concluded with a significant increase in ordering activity.
  • Port and terminal operators: Despite recording third consecutive quarter of increase (4Q20: 18%, 3Q20: 4%, 2Q20 14% and 1Q20: -38%), port sector average return was unable to recover the loss it incurred during 1Q20 meltdown, ending the yearly return in negative territory (2020: -16%). Since the second quarter of 2020, both central bankers and governments around the world made synchronized efforts to uplift investor’s confidence. The positive effects of which was clearly visible in later quarters. Even-though lower interest rates and vaccine rollout are currently supporting the rich equity valuations, higher consumer confidence along with the influx of liquidity can quickly bring back the inflationary pressures, requiring substantial uptick in corporate earnings to support the current up-move.
  • Dry bulk shipping: Dry bulk shipping has seen a strong comeback after a dip due to the COVID-19 outbreak. The recovery was further fuelled by the recent surge in the demand for commodities after the stimulus package from various economies came into play. Furthermore, the ongoing winter has boosted heating demand in China, in turn, increasing coal imports from Indonesia and Russia. Moreover, due to the cold weather, energy demand has also strengthened in other Far Eastern countries and Europe. This, in tandem with multi-year high LNG spot prices, will be positive for non-coking coal imports. Hence, we expect the coming months to be of consolidation for shipping rates and stock prices.
  • LNG shipping: DMFR LNG shipping index surged 29.3% in 4Q20 on account of robust spot LNG shipping rates. LNG shipping companies’ stocks with spot exposure have gained the most, with Golar LNG increasing 59.1% and Flex LNG 52.5%. LNG spot shipping freight rates surged due to the cold snap in Asia, congestion in the Panama Canal and lower availability of LNG vessels in the spot market. DMFR LNG index declined 19% in 2020, with Nakilat being the only stock which recorded positive returns (up 39.5%).
  • LPG shipping: VLGC freight rates were volatile in FY20, but moved up in 4Q20. Despite the holiday season in December, fixtures remained steady from the US and the Middle East, with fixing window getting extended to February. The congestion at the Panama Canal, wide US-Asia propane arbitrage and strong LPG demand in Europe and Asia are expected to further strengthen shipping rates in the second half of January, following which, we may see some consolidation.
  • Crude tanker shipping: The three major indices – S&P 500, DJIA and Nasdaq Composite – surged 12.4% QoQ on average in 4Q20 with positive news on vaccine availability, giving hope that COVID-19 will finally be contained. However, stocks of crude tanker shipping companies in our portfolio declined 4.1% over the same period as unusually weak earnings across vessel classes kept these stocks under pressure. Ample tonnage availability, weak oil demand coupled with increased restrictions in several European countries led to a sharp decline in TCE rates of crude carriers. For instance, average VLCC earnings on Middle East-China (TD3C) in 4Q20 plunged 96.5% to ~USD 10,300pd from a record high of ~USD 250,000pd seen in mid-March. TCE rates on major trading routes are expected to slide further across vessel classes, weakening crude tanker stock earnings in 1H21.
  • Product tanker shipping: DMFR product tanker index moved up 5.9% in 4Q20 as spot rates strengthened on the key trading routes amid seasonal demand. Second-hand asset prices of MR vessels remained flat over the same period as the uptrend in day rates arrested the decline in asset prices. However, the index plunged 53.5% YoY in 2020 as the fall in TCE rates across vessel class has substantially eroded the market capitalisation of product tanker companies. Meanwhile, the rollout of vaccines provides hope of potential recovery, but the product tanker market is expected to remain under pressure in 1H21.

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$6bn: The combined value of container shipping industry investments we have advised on since 2010.


$20bn: The value of financing projects we have provided commercial due diligence advice for in port M&A since 2010.


The number of countries in which our advisors have completed assignments since 2005.


Our advisors have been involved in over 400 port assignments over the past 10 years.
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