Shipping

Global shipping industry’s US$231 Billion CAPEX needs far exceed combined market cap

Global – The global newbuild ship orderbook has fallen to a historical low of 10% but the global shipping industry’s US$231 Billion CAPEX requirements remain enormous and far exceeds the combined US$191 Billion market capitalisation of all the world’s listed shipping firms. In 2018 alone, the global shipping industry will need US$114B capital to fund the newbuild ship deliveries.

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Reeling from weak coal, BDI is more dependent on China iron ore imports than ever

Global – The Baltic Dry Index (BDI) has fallen 5% in the past week. The Panamax market was the hardest hit, with the Panamax index down 11% w/w, followed by the 9% w/w correction in the Supramax index. This was driven by weak coal shipping demand from China & other countries that would have been more acutely felt had it not been for India’s increased coal demand. The BDI is now more dependent than ever on China iron ore imports which constitutes 72% of global seaborne iron ore imports

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Industry oversupply resurfaces to plague Transpacific & Asia-Europe freight rates yet again

Global – Container shipping freight rates in the spot market have fallen markedly by 4% in the past week and are 5% lower y/y. This is mainly driven by industry oversupply, rather than the lack of trade demand. The head-haul demand growth from Asia to North America and Europe has actually accelerated recently to 10% and 7% y/y respectively. Therefore, unless more capacity is being taken out, the liners’ planned rate hikes in mid-November and early December may meet with limited and short-lived success.

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Our Absolute Stock Returns Beat the Street Since We Initiated Research Coverage

Global – Crucial Perspective is now 8 months old! We take this opportunity to review the performance of our stock ratings so far. Based on Bloomberg’s tally, our absolute return was 13.5% and has outperformed our peers’ returns by 9ppts in the past 6 months based on stock ratings. Our stock returns rank us in the #1 position among all analysts for our Outperform ratings on Orient Overseas International and for AirAsia, 2nd position for Air China …..

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Which region in the world buys the most ships and aircraft?

Global – It’s no surprise that the Asia Pacific region is now the world’s largest buyer of ships and aircraft. However the scale is staggering with the Asia Pacific region accounting for 50% and 34% of the total shipping and aircraft capacity on order. By the time these orders are delivered, the Asia Pacific region will become the world’s second largest aircraft owner with 29% market share and the second largest ship owner position with 41% market share.

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Container shipping rates finally tick up but industry oversupply could return in 2018

Global – The global container shipping sector’s spot market freight rate index finally strengthened by 3% w/w after declining for 14 weeks. With the monthly newbuild vessel deliveries trending lower q/q in 4Q17 and the global trade demand remaining strong, we see limited downside risk to freight rates near term. We forecast the global container shipping demand to grow 5.0% y/y, ahead of our projected capacity growth of 3.9% y/y in 2017. However, 2018 could be a challenge again for the global container shipping industry as it will have to tackle more aggressive capacity growth.

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BDI hits 3-year high, further gains depend on China & Japan’s restocking given benign supply growth

Global – The Baltic Dry Index rose 8% w/w to 1335, a level not seen since November 2014. Although this is still a far cry from its all-time high of nearly 12,000 back in 2008, the BDI’s return to its historical 10-year average level is encouraging. Importantly, the global dry bulk shipping capacity has risen 3.0% ytd, trending slightly below our forecast and close to our global demand growth projection of 4.3% this year. If China and Japan’s major bulk commodity restocking trends continues, it could sustain the current freight rate recovery.

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East-West container shipping rates fall due to rising supply & China factory closures

Global – The back-to-school peak shipping season has failed to lift spot market freight rates so far notwithstanding the carriers’ rate hike attempts. Asia-Europe and Transpacific spot freight rates have weakened more significantly in the past week. In comparison, the Intra-Asia Pacific spot rates managed to hold up w/w and are still significantly higher y/y. This could drive investors to switch to carriers with larger Intra-Asia exposure and avoid carriers with substantial Asia-Europe/North America exposure.

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CMA CGM mega ship orders may drive market share race & Asian shipbuilder equities

Global – CMA CGM is close to confirming a 9 mega ships order that would raise its global market share to 12% and the OCEAN Alliance’s combined market share to 28%. This is rather Déjà Vu and could spur the global container shipping industry giants to buy ships and race for market share again. Investors may do well to start looking at the Asian shipbuilder stocks such as Daewoo DSME (042660:KS), Hyundai Heavy HHI (009540:KS) and Samsung Heavy SHI (010140:KS). 

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Lagging small-vessel rates may push Handy stock investors to Japanese Shipping Giants

Global -The recent surge in Capesize and Panamax spot freight rates coupled with weaker chartering activity in the Handymax and Handysize vessel segments could drive some profit-taking in Handy operators Pacific Basin Shipping (2343:HK), First Steamship (2601:TT) and Precious Shipping (PSL:TB) whose share prices have already risen 48%, 37% and 29% ytd in favour of the Japanese shipping lines …

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Orient Overseas (316:HK)’s long-haul exposure rose, unit cost ex-fuel fell, stronger 2H17 outlook

Hong Kong – OOIL turned profitable in 1H17, mainly driven by stronger long-haul shipping volume & the rebound in Asia-Europe and Intra-Asia/Australasia freight rates, lower unit cost ex-fuel and property & investment-related gains. OOIL’s share price has risen 66% since we initiated coverage with an Outperform rating on 14 March 2017. We expect most OOIL’s public shareholders to accept COSCO & SIPG’s Offer of HK$78.67 cash per OOIL share.

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Shipping Equities gain from structurally improving sector outlook

Global – Never in the last 30 years history of shipping has the global vessel orderbook-to-fleet ratio been so low at 10%. This has reduced the risk of protracted oversupply in most vessel segments in the next 2 to 3 years unless there is a resurgence of substantial newbuild vessel orders. The equity markets have been quick to price this in but improving earnings could drive the Asian shipping stocks higher, particularly from next year.

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Global Containership Orderbook-to-Fleet Hits 20-year Low

Global – The global container shipping sector has been plagued by oversupply, with capacity growing at 10% pa in the past 20 years. What’s positive is that the industry has been exercising significant supply restraint ytd. The global containership fleet capacity grew only 1% y/y ytd to 20m TEUs and orderbook-to-fleet ratio has fallen to 14%.

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Panamax demand leading the dry bulk recovery & other BDI updates

Global – We track the latest shipping demand and freight rate trends in the global dry bulk shipping market. Overall, Japan and China demand is helping to lift vessel chartering demand and spot freight rates, with the recent rebound in the BDI mainly led by the Panamax vessel segment. The Chinese ports’ record high iron ore inventory levels could impede Capesize shipping demand near term unless …..

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Robust Transpacific trade is driving shipping demand growth

The Asia Pacific region’s exports to the United States have risen 5% y/y while US exports to the Asia Pacific region surged 16% y/y in January-April 2017. The strong back-haul US-Asia Pacific trade growth is mainly driven by oil & gas, soybean and grains exports. However, the global tanker shipping rate recovery has generally lagged the dry bulk and container shipping sector this year due to the excess supply.

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Global Shipping: Qatar Crisis to drive ton-mile demand and freight rates up

Global – Following the Saudi-led alliance’s move to cut off diplomatic & transport links with Qatar, we assess the impact on Qatar & the global shipping industry. This is likely to drive ton-mile demand up. In addition, the vessel re-routing, higher risk premiums and panic stockpiling will push up freight rates on Middle Eastern routes in the near term

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Analysing the sustainability of the strong Capesize market & other BDI updates

Global – The Baltic Dry Index (BDI) has fallen 3% w/w to 949 but is still 52% higher y/y due to the dismally low base last year. We saw the sharpest decline in the Panamax Index which fell 11% w/w. In the smaller vessel segments, the Handysize and Supramax indices fell 4% and 3% respectively w/w. In contrast, the Capesize index rose 5% w/w …

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“Belt and Road” Initiative’s impact on global dry bulk shipping and other BDI updates

Global – China’s Belt and Road Initiative is expected to boost infrastructure spending in China and in the participating countries, particularly in railroads, oil & gas pipelines, port terminals as well as other infrastructure development projects. Assuming that Belt and Road boosts infrastructure spending by US$200B per annum and 10% of this is spent on steel, this would imply around 44 million tons …..

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Dry Bulk Shipping and BDI Analytics – Week 18 of 2017

Global – We have just sailed past the one-third mark of year 2017; it is time to take stock of what has changed on the supply side in the global dry bulk shipping sector and provide an update on the industry’s latest trends. In summary, on the supply side, the global dry bulk shipping sector capacity growth ytd is trending in line with our full year forecast of 4.9%. On the demand side, ship chartering activity has been buoyant, with a surge in ships being fixed in the spot market in all vessel segments w/w and 26% higher y/y

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Dry Bulk Shipping and BDI Analytics – Week 13 of 2017

Global – We launch our inaugural weekly report, monitoring the global dry bulk shipping sector’s latest freight rates and trade flow trends, sharing our projected demand and supply projections in each dry bulk vessel segment as well as our views on how these key drivers could impact the dry bulk shipping stocks listed in the Asia Pacific region.

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Container Freight Rates and Asian Shipping Stocks Monitor – Week 13 of 2017

Global – We received a number of queries on why we focus more on tracking the weekly China Containerized Freight Index (CCFI) rather than the more commonly cited weekly Shanghai Containerized Freight Index (SCFI). While every index has its own benefits and limitations, we view the CCFI to be more representative of the container shipping freight rate changes felt by the liners covering 14 major trade lanes while the SCFI is limited to head-haul spot market freight

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Container Freight Rates and Asian Shipping Stocks Monitor – Week 12 of 2017

Global – We publish our weekly update on Container Freight Rates and Asian Shipping Stocks Monitor, highlighting the industry’s latest positive and negative drivers. WHAT’S POSITIVE? The liners’ capacity deployment on the major East-West trade lanes remains conservative in March. The scheduled weekly sailing capacity is only 1% higher y/y for the Asia-Europe trade and steady y/y for the Asia-North America trade.

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Global Dry Bulk Shipping Outlook – Is the current Baltic Dry Index (BDI) rally sustainable?

Global – The Baltic Dry Index (BDI) has risen 25% ytd and the ytd average is 32% higher than the average levels in 2016. We explore the global dry bulk shipping sector’s key drivers to ascertain if this rally is sustainable going forward. In summary, we believe that the worst is finally over for the global dry bulk shipping sector and expect the industry’s operating outlook to improve gradually.

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Orient Overseas (International) Ltd. Initiation Report – Still good value based on key fundamentals and potential takeover

Hong Kong – OOIL’s share price has risen 35% and outperformed the Hang Seng Index by 27% year-to-date. We believe this is mainly driven by market speculation that OOIL could be a potential takeover target on top of the recent improvement in container shipping volume and freight rates in the spot market. OOIL is indeed an attractive takeover target given its strong business model. Key “push factors” for OOIL’s shareholders to sell

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Container Freight Rates and Asian Shipping Stocks Monitor – Week 10 of 2017

Asia – We launch our inaugural weekly report, monitoring the container shipping sector’s latest container freight rate and volume trends in the major trade lanes and assess their implications on the Asian container shipping stocks. Overall, the container freight rates and volume trends are looking more favourable y/y and are likely to drive the Asian container shipping stocks’ prices higher near term. In summary, we expect the Asian container shipping stocks with …..

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