MENU
Search
Login

Maritime Financial Research

Overview

Latest Coverage

Maritime Financial Insight

July 2018

 

Download the July report

Credit markets

75% of maritime bonds have fallen in value in the first half of 2018

Bondholders have seen losses in the first six months of the year. A staggering 75% of bonds in our analysis (more than 50% under our coverage) have fallen in value during the first half of the year. The cause of the losses in the first six months was largely attributable to the rising Treasury yields especially for the USD denominated bonds. Two year US treasury yields were on a rally and touched the 2008 level of 2.5% while ten year US securities yields climbed to nearly 3%. The market’s weakness in container shipping and ports that form the majority of our sample data both in terms of number of issuances and USD-equivalent value was also a major factor of the poor performance for the first six months of the year.

 

Dry bulk shipping

Players with diversified fleets and tight cost control emerge champions in the first half of 2018

Dry bulk shipping stocks have gained 2.4% on average since the beginning of 2018. The majority of dry bulk shipping stocks earned positive returns due to firm trade of coal, iron ore and other bulk commodities. Charter rates continued to find support through favourable supply-demand fundamentals in 2018 despite a slowdown in Chinese industrial activity in the first quarter. Notably, earnings in the dry bulk market saw the usual signs of seasonality in the first quarter of 2018, albeit at levels higher when compared with historical lows witnessed in the first quarter of 2017.

 

Tanker shipping

Stock price gains on OPEC announcement short-lived

Crude tanker freight rates inched up marginally in June, as a result of an expected relaxation of the OPEC production and increased refinery runs in the US and Europe. However, crude oil supply concerns will continue to haunt the tanker market. Declining Venezuelan production, supply glitches in Libya and a potential decline in Iranian crude once sanctions are in place are negative for the crude tanker market. Although the crude tanker fleet has declined by 0.8% in the first half of 2018 on account of an elevated level of scrapping, this has failed to provide any stimulus to freight rates. An increase in OPEC’s crude production will support the crude tankers market although the likely reduction of Iranian barrels from November 2018, will offset much of these gains.

 

Product Tanker shipping

Product Tanker rates remain suppressed

Recent strikes in Brazil and refinery maintenance in Asia (mainly China) led to product tanker r rates plunging sharply over the last few months exacerbating the weak freight market conditions prevailing due to vessel over supply. The four-day strike in Brazil significantly impacted commodity imports and also forced the government to reduce diesel prices.

 

Gas shipping

LNG stocks move up as market strengthens

LPG stocks under our coverage are on average up 2.2% since the beginning of 2018. Low average freight rates and increasing bunker costs have negatively impacted the bottom line of LPG shipping companies. Spot earnings for VLGCs on the benchmark AG-Japan route averaged USD 2,200pd in April - the lowest since July 2009, and were much below the average operating cost of USD 9,000pd. The rates have shown a marked improvement since the beginning of 2018 and currently average USD 10,200pd on the AG-Japan route, owing to a recovery in demand.

 

Container shipping

Carriers suffer a hard landing in 2018

Rising bunker costs, sluggish freight rates and the tariff wars have taken a brutal toll on liner company stocks this year. As these factors gathered steam, they left carrier stocks in the doldrums.

 

Port operators

Trade war dampens investor sentiments

The first quarter of 2018 witnessed buoyant throughput growth of 6.1% (rolling annual average). Drewry expects trade growth to remain strong at 6.5% for full year 2018, however, this is predicated upon the US and China finding an early resolution to their trade disagreements. An escalation of the trade war will likely lead to a downward revision of estimates.

FREE TRIAL to our Equity and Credit Research Service

Disclaimer: Important Information

Whilst the Company believes the information it uses for research is from sources believed to be reliable, the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. The opinions and estimates included herein reflect the analysts’ views based on available information on the dates specified and these views may have changed without notice. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific client. The information herein is published for clients only and is not to be taken in substitution for the exercise of judgement by the client, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the Company, accepts no liability for any direct, special, indirect, consequential, incidental damages, or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and employees may have positions or other interests in, and may effect transactions in, securities mentioned herein. DFRS does not seek to do business with any of the companies mentioned other than sell them these reports. However, other related parts of Drewry Shipping Consultants Holdings Limited may seek to provide "advisory services or the sale of other group research products" to companies mentioned in this report.

 

Jurisdictions

The distribution of this email is governed by the UK Financial Services and Markets Act of 2000 (the “FSMA”) and is restricted to qualified parties as defined by the FSMA. The distribution of this email may be restricted by rules and regulations in certain jurisdictions. Persons into whose possession the email may come are required to inform themselves about and to comply with all applicable laws and regulations in force in any jurisdiction in or from which it invests or receives or possesses this email and must obtain any consent, approval or permission required under the laws and regulations in force in such jurisdiction.

 

For US Investors

Drewry Financial Research Services (DFRS or the “Company”) is an independent research company and is not a registered investment adviser and is not acting as a broker dealer under any US federal or state securities laws. The Company does not provide individual investment advice or hold client money. As such, the Company is not required to be registered as an investment adviser.

Related News

Drewry launches special report: Hyundai Merchant Marine (HMM) - what lies ahead?

Drewry Financial Research has conducted an in-depth assessment of the issues facing HMM and their future prospects with consideration given to current and anticipated future market conditions.

Maritime Financial Model Portfolio Report - March 2018 - now available

Our model portfolio gained 2.8% between November 2017 and February 2018, outperforming its sector-specific benchmark – Bloomberg’s BI SHIP (down 4.5%)

6

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

20

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

54

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

400

Our advisors have been involved in over 400 port assignments over the past 10 years.
Latest Coverage
Our equity research service provides our clients with a range of report formats and supporting resources for the companies we cover.

Market understanding

Investment analysis based on a clear understanding of the market at both an industry and sector level.

Quality insights

Our analysts have access to one of the most up-to-date, comprehensive and reliable sources of market insight.

Company

Type of Report

Date

Download

Container Shipping 2018 - Headwinds push back recovery

Equity Research Report 11 Oct 2018 PDF

Golar LNG - Company update

Equity Research Report 11 Oct 2018 PDF

Maritime Model Portfolio - October 2018

Model Portfolio 10 Oct 2018 PDF

ICTSI 2Q18 - Result Update

Equity Research Report 09 Oct 2018 PDF

China Merchant Port Holdings - Equity research report

Equity Research Report 04 Oct 2018 PDF

StealthGas 2Q18 - Result update

Equity Research Report 27 Sep 2018 PDF

Navigator Holdings 2Q18 - Result update

Equity Research Report 21 Sep 2018 PDF

BW LPG 2Q18 - Result update

Equity Research Report 14 Sep 2018 PDF

Pacific Basin 1H18 - Result update

Equity Research Report 13 Sep 2018 PDF

Golden Ocean 2Q18 - Result update

Equity Research Report 05 Sep 2018 PDF

View more