Equity analyst - Containers, Drewry Maritime Financial Research

Nilesh Tiwary

Equity analyst - Containers

Maritime Sector, Equity & Credit Research

Drewry Maritime Financial Research

With no ties to other players in the shipping, finance or banking world, we provide a uniquely impartial view of the markets and companies we cover. Our parent organization, Drewry is a leading independent provider of research services to the maritime and shipping industry, employing over 100 professionals across an international network of offices in London, Delhi, Singapore and Shanghai. Combining our market-leading resources with seasoned sector expertise DFRS offers a highly differentiated and comprehensive range of investment and financial research services to lenders and prospective investors in publicly listed maritime and shipping companies. The full service of reports, supporting resources and sector orientated webinars provides our clients with the most complete picture of the organisations under coverage as is possible. We have been charting and analysing the world’s maritime markets for more than 40 years. This unrivalled intelligence and understanding provides the foundation of our research service. Our analysts have access to one of the most up-to-date, comprehensive and reliable sources of market insight and research data available today. We look at globally listed companies within the following sectors: Port Operators, Container Shipping, Container Manufacturing & Leasing, LNG Shipping, Dry Bulk Shipping and Tanker Shipping. Combine in-depth sector expertise with financial analysis focusing on over 50 stocks globally.

Thematic (Sector/Industry)

The short term impact of the coronavirus health crisis is a sharp hit to global container volumes and carrier earnings, but we re-iterate that the medium-term impact will be manageable provided the virus spread is contained.

The short term impact of the coronavirus health crisis is a sharp hit to global container volumes and carrier earnings, but we re-iterate that the medium-term impact will be manageable provided the virus spread is contained. 

Container Shipping and Coronavirus - Update

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Independent and original Asian investment research

Aletheia Capital

Aletheia Capital (HK) Ltd. (previously known as Asianomics) combines the extensive knowledge of its experienced team with technology and regulatory changes to disrupt Global Markets business in Asia. The firm is completely independent with no conflicts of interest either on Investment Banking advisory or Capital Markets execution.

Equity Bottom-Up

AP Moeller - Maersk A/S / Equity Bottom-Up

Our index suggests average container shipping rates increased by around 6.6% in January. This is the largest YoY increase for our index since June 2019 and follows two consecutive months of YoY declines. However, despite the increase, we believe container shipping margins remain under pressure. The required shift to more expensive low-sulphur fuel (effective January 1st) led to a sharp rise in operating costs, too. We suspect higher average container rates in January -- the result of General Rate Increases (GRIs) and a new Low-Sulphur Surcharge (LSS) in some tradelanes -- recovered less than the full increase in actual fuel expenses. Looking forward, it's clear that the COVID-19 outbreak has temporarily emptied ships sailing from Asia to North America and Europe, and that normalcy may not return for some time. Although carriers continue to push for additional rate and surcharge increases in the coming weeks, we don't think these increases will 'stick' unless or until ships begin to fill up again, which we don't expect to happen in 2020. We continue to believe near-term container shipping earnings are likely to decline for most carriers. Despite optimism about the potential for improved trade relations between the US and China and a a demand 'snap-back' once COVID-19 is controlled, we would avoid the segment for now.

Our index suggests average container shipping rates increased by around 6.6% in January. This is the largest YoY increase for our index since June 2019 and follows two consecutive months of YoY declines. However, despite the increase, we believe container shipping margins remain under pressure. The required shift to more expensive low-sulphur fuel (effective January 1st) led to a sharp rise in operating costs, too. We suspect higher average container rates in January -- the result of General Rate Increases (GRIs) and a new Low-Sulphur Surcharge (LSS) in some tradelanes -- recovered less than the full increase in actual fuel expenses. Looking forward, it's clear that the COVID-19 outbreak has temporarily emptied ships sailing from Asia to North America and Europe, and that normalcy may not return for some time. Although carriers continue to push for additional rate and surcharge increases in the coming weeks, we don't think these increases will 'stick' unless or until ships begin to fill up again, which we don't expect to happen in 2020. We continue to believe near-term container shipping earnings are likely to decline for most carriers. Despite optimism about the potential for improved trade relations between the US and China and a a demand 'snap-back' once COVID-19 is controlled, we would avoid the segment for now.

TRACKING TRAFFIC/Containers & Air Cargo: Rates Rose in January, But Margins Remain Under Pressure

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

The Korea Exchange (KRX) will announce the results of the June 2020 review of the KOSPI 200 in May. The constituent changes will be effective from 12 June 2020 and the rebalancing trades will need to be done at the closing auction on 11 June 2020.In this Insight we look at the KOSPI 200 index methodology, the historical performance of inclusions vs exclusions, at potential candidates for inclusion/exclusion in this review and some of the details around the names.At the current time, we see ten stocks being added to and deleted from the index with another three stocks as very close adds and deletes.

The Korea Exchange (KRX) will announce the results of the June 2020 review of the KOSPI 200 in May. The constituent changes will be effective from 12 June 2020 and the rebalancing trades will need to be done at the closing auction on 11 June 2020.In this Insight we look at the KOSPI 200 index methodology, the historical performance of inclusions vs exclusions, at potential candidates for inclusion/exclusion in this review and some of the details around the names.At the current time, we see ten stocks being added to and deleted from the index with another three stocks as very close adds and deletes.

KOSPI200 Rebalance Preview - The Early Bird Gets the Worm

<div>Most of the shipping stocks fell in the third week of January after the breakout of the corona virus caused multiple casualties in China. Nonetheless, we expect limited impact on container shipping companies in the longer term. However, if the severity of the outbreak increases, industrial production and retail sales could be affected, leading to rising inventory on ports. In addition, some carriers have warned of a temporary shortage of containers because, 1) Chinese New Year has been extended in China, 2) a shortage of customs and port labour could hold containers. Meanwhile, our overall view remains unchanged towards the stocks under coverage. If the situation is well managed and contained and depending on economic impact and valuations, we may consider revising our fair values. For now, the shock to demand and the macro environment would more likely be short term rather than the long term.</div>

Most of the shipping stocks fell in the third week of January after the breakout of the corona virus caused multiple casualties in China. Nonetheless, we expect limited impact on container shipping companies in the longer term. However, if the severity of the outbreak increases, industrial production and retail sales could be affected, leading to rising inventory on ports. In addition, some carriers have warned of a temporary shortage of containers because, 1) Chinese New Year has been extended in China, 2) a shortage of customs and port labour could hold containers. Meanwhile, our overall view remains unchanged towards the stocks under coverage. If the situation is well managed and contained and depending on economic impact and valuations, we may consider revising our fair values. For now, the shock to demand and the macro environment would more likely be short term rather than the long term.

Container Shipping - Coronavirus and Initial Thoughts

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/114/303/original/BANNER-CARGO-FINAL.png?1579444685" class="editor-image img-responsive" data-smartkarma-image-id="114303"></figure>In H119, container shipping rates in the key Transpacific Eastbound tradelane held up well despite tepid demand, as fleet expansion in most of 2019 was modest and some peak season (Q3) demand was probably pulled forward to avoid the threat of new tariffs on Chinese goods moving to the US.But it appears key Transpacific Eastbound rates have been declining since late Q3 or early Q4, and we believe profitability probably peaked in Q3 for most carriers. The measures we track suggest average rates declined by 4-5% YoY in November and December. With Transpacific Eastbound under pressure and fuel prices still high, we believe near-term earnings are likely to decline for most container shipping companies. Despite optimism about the potential for improved trade relations between the US and China, we would avoid the segment for now.

In H119, container shipping rates in the key Transpacific Eastbound tradelane held up well despite tepid demand, as fleet expansion in most of 2019 was modest and some peak season (Q3) demand was probably pulled forward to avoid the threat of new tariffs on Chinese goods moving to the US.But it appears key Transpacific Eastbound rates have been declining since late Q3 or early Q4, and we believe profitability probably peaked in Q3 for most carriers. The measures we track suggest average rates declined by 4-5% YoY in November and December. With Transpacific Eastbound under pressure and fuel prices still high, we believe near-term earnings are likely to decline for most container shipping companies. Despite optimism about the potential for improved trade relations between the US and China, we would avoid the segment for now.

TRACKING TRAFFIC/Containers & Air Cargo: For Most Box Carriers, Profitability Likely Already Peaked

South Korea

HMM Co., Ltd. provides marine transportation services.  The Company commands different types of vessels including full container vessels, oil tankers, car carriers, LNG carriers, bulk carriers, and tramps.

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HMM Co., Ltd. (011200 KS)

Container Shipping and Coronavirus - Update

The short term impact of the coronavirus health crisis is a sharp hit to global container volumes and carrier earnings, but we re-iterate that the...

Drewry Maritime Financial Research

TRACKING TRAFFIC/Containers & Air Cargo: Rates Rose in January, But Margins Remain Under Pressure

Our index suggests average container shipping rates increased by around 6.6% in January. This is the largest YoY increase for our index since June...

Daniel Hellberg

KOSPI200 Rebalance Preview - The Early Bird Gets the Worm

The Korea Exchange (KRX) will announce the results of the June 2020 review of the KOSPI 200 in May. The constituent changes will be effective from...

Brian Freitas

Container Shipping - Coronavirus and Initial Thoughts

Most of the shipping stocks fell in the third week of January after the breakout of the corona virus caused multiple casualties in China....

Drewry Maritime Financial Research

TRACKING TRAFFIC/Containers & Air Cargo: For Most Box Carriers, Profitability Likely Already Peaked

In H119, container shipping rates in the key Transpacific Eastbound tradelane held up well despite tepid demand, as fleet expansion in most of 2019...

Daniel Hellberg

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