News for the seafarers
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Tankers stocks are doing great. Dry bulk and container stocks temporarily stopped the bleeding. “Maxim stocks” still underperform.
Shipping stocks are not considered “buy and hold” investments these days — for good reason. It’s all about timing. Case in point: Tanker stocks are now soaring after years mired in negative territory.
Fresh 52-week highs were hit Tuesday by Scorpio Tankers (NYSE: STNG), Ardmore Shipping (NYSE: ASC), Euronav (NYSE: EURN), DHT (NYSE: DHT), International Seaways (NYSE: INSW) and Teekay Tankers (NYSE: TNK).
Tankers stocks are up double digits year to date (YTD), in some cases triple digits. However, the rebirth of tanker stocks comes after two painful “bagholder” years. Anyone who bought and held a basket of tanker stocks since January 2020, pre-COVID, would have only recently broken even.
To gauge how shipping stocks have fared, American Shipper crunched the numbers by segment — tankers, dry bulk and containers — both YTD and across the COVID era.
The analysis also examined Greek-sponsored micro-cap shipping stocks in various segments involved in fully disclosed, dilutive sales of common equity and warrants facilitated by New York investment bank Maxim Group. “Maxim stocks” appear to attract retail investors looking to gamble on short-term price swings even though data confirms that these shipping stocks fare much worse than others over time.
The pattern of winners and losers YTD is very different from the medium-term pattern over the course of the pandemic. From Jan. 1 to Monday’s close, tanker stocks were up 88%. Dry bulk stocks were up 21% and container shipping stocks just 1% (for methodology, see below).
In contrast, shares of shipping companies that have sold equity via Maxim-related deals were down 42% YTD.
This year has been a continual upward climb punctuated by a few brief pullbacks for tanker stocks. Dry bulk shares kept pace with tanker shares until June, after which lower spot rates and economic headwinds took their toll. Dry bulk shares have seen a small recovery since mid-July.
Container shipping shares maintained their winning streak until the end of March. Then they fell back, although, like dry bulk shares, they’ve regained some ground since mid-July.
The Maxim-linked shipping share average jumped briefly in March due to a fleeting spike in one equity, Imperial Petroleum (NASDAQ: IMPP), after which that stock and the overall average slid lower.
Tanker stock performance has diverged based on tanker type this year. Shares of pure product-tanker owners are far outperforming the rest, up by an average of 173% year to date. Mixed fleet owners — with both crude and product tankers — are up 73%. Pure crude-tanker owners are up 47% (an impressive gain considering that crude tanker owners are still reporting losses).
Over the course of the pandemic, container shipping stocks have been by far the biggest winner. As a group, they’re still up 409% on average since Jan. 1, 2020, despite flat performance in 2022 YTD.
Dry bulk shares have been the second-biggest winner. Even with this year’s retrenchment, they’re up 129% since January 2020. In contrast, tanker stocks — which are more in the spotlight this year — are essentially flat versus January 2020 (up 3% as of Monday’s close).
Highlighting the importance of stock-trade timing, the performance of different tanker segments over the medium term was the reverse of 2022 YTD performance. Since Jan. 1, 2020, product tanker stocks fared the worst, mixed-fleet stocks were in the middle, and crude tankers fared best.
The performance of the Maxim-linked shipping equities over the medium term highlights just how important it is to get in and out of such equity bets very quickly.
Keeping in mind that the maximum loss is 100%, the share values of Top Ships (NASDAQ: TOPS) and Globus Maritime (NASDAQ: GLBS) were both down 98% at Monday’s close versus Jan. 1, 2020. Over the same time frame, shares of Seanergy (NASDAQ: SHIP) and Castor Maritime (NASDAQ: CTRM) were both down 91%.
Shares of Imperial Petroleum — a spinoff of StealthGas (NASDAQ: GASS) that Maxim has supported — have lost 95% of their value since the stock began trading in early December. Shares of OceanPal (NASDAQ: OP) — a spinoff of Diana Shipping (NYSE: DSX) that conducted an offering with Maxim as sole bookrunner — have lost 91% of their value since they began trading in late November.
A new shipping equity doing Maxim-placed offerings emerged last month. Seanergy spun off United Maritime Corp. (NASDAQ: USEA) into a separate listing that began trading on July 7.
In just one month, United Maritime’s shares shed 71% of their value.
Averages use adjusted closing price data of U.S.-listed shipping stocks from Yahoo Finance. Segment averages were not weighted by market cap.
Only large “pure” owners in each segment were included in averages. For the pure product-tanker average: Scorpio Tankers and Ardmore Shipping. Crude tankers: Euronav, DHT and Nordic American Tankers (NYSE: NAT). Mixed-fleet operators: Teekay Tankers, Frontline (NYSE: FRO) and International Seaways. Tanker owners with significant holdings in non-crude/product segments, such as Navios Partners (NYSE: NMM) and Tsakos Energy Navigation (NYSE: TNP), were excluded.
The dry bulk average was made up of the four largest U.S.-listed pure bulker owners by market cap: Star Bulk (NASDAQ: SBLK), Golden Ocean (NASDAQ: GOGL), Genco Shipping & Trading (NYSE: GNK) and Eagle Bulk (NASDAQ: EGLE).
The container shipping average comprises liner operators Zim (NYSE: ZIM) and Matson (NYSE: MATX), as well as pure container-ship lessors Danaos (NYSE: DAC), Global Ship Lease (NYSE: GSL) and Euroseas (NASDAQ: ESEA). Costamare (NYSE: CMRE), Atlas (NYSE: ATCO) and Navios Partners were excluded due to significant noncontainer holdings.
The Maxim stocks average comprises Top Ships, Seanergy, Castor Maritime, Globus Maritime, Imperial Petroleum and OceanPal. Due to the recency of its listing, share pricing of United Maritime was excluded.
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Port congestion and voyage cancellations by shipping lines are preventing a steeper slide in spot container freight rates.
There’s an old Greek shipping saying that goes: “Ninety-eight tankers and 101 cargoes, boom. Ninety-eight cargoes and 101 tankers, bust.” This doesn’t translate so well into modern-day container shipping because the consolidated liner sector manages the number of ships in service a lot better than the fragmented tanker business.
Tanker spot rates can plunge violently lower when supply exceeds demand. One of the big questions for container shipping has been: Will spot rates plunge precipitously after demand pulls back, as it has in the past in bulk commodity shipping? Or will there be a gradual decline toward a soft landing?
So far, it looks gradual. Trans-Pacific rates have steadied in July and early August. In fact, some indexes show spot rates ticking higher again.
Spot rates are at least temporarily plateauing because U.S. import demand remains above pre-COVID levels, some U.S. ports remain extremely congested, and ocean carriers are “blanking” or “voiding” (i.e., canceling) sailings, both because their ships are stuck in port queues and because they’re matching vessel supply with cargo demand to avert the fate of Greek tanker owners.
“Void sailings are still the go-to options for carriers at this point to try and stymie the fall in rates,” said George Griffiths, managing editor of global container freight at S&P Global Commodities.
“Congestion is still the buzzword for East Coast ports, with Savannah currently feeling the full force of loaded imports and associated delays,” he told American Shipper.
Different spot indexes give different rate assessments but generally show the same trends. The Freightos Baltic Daily Index (FBX) Asia-West Coast assessment was at $6,692 per forty-foot equivalent unit on Friday.
The good news for shippers booking spot cargo: That’s just one-third of the all-time peak this index reached in September. The bad news: Friday’s assessment is up 2.7% from the low of $6,519 per FEU hit on Aug. 2, and it’s still 4.5 times higher than the rate at this time of year in 2019, pre-COVID.
The FBX Asia-East Coast spot rate assessment was at $9,978 per FEU on Friday, less than half the record high in September. However, it was up 3.5% from the recent low of $9,640 on Aug. 2 and still 3.6 times higher than 2019 levels.
The weekly index from Drewry portrays a gentler descent than the FBX, because Drewry did not include premium charges in its spot assessments at the peak.
Unlike the FBX, Drewry’s Shanghai-Los Angeles assessment does not show a recent uptick. It was at $6,985 per FEU for the week announced last Thursday, its lowest point since June 2021. It was down 44% from its all-time high in late November 2021, albeit still 4.2 times higher than rates at this time of year in 2019.
Drewry’s weekly Shanghai-New York assessment was at $9,774 per FEU on Friday. Rates were relatively stable over the past two week, yet the latest reading is the lowest since June 2021 and down 40% from the peak in mid-September.
Drewry’s Shanghai-New York assessment on this route is still 3.5 times pre-COVID levels.
Daily assessments from S&P Global Commodities (formerly Platts) show a widening divergence between North Asia-West Coast and North Asia-East Coast Freight All Kinds (FAK) rates.
S&P Global assessed Friday’s North Asia-East Coast FAK rate at $9,750 per FEU, up 2.6% from the recent low hit on July 29. Spot rates on this route have roughly plateaued since late April, according to this index.
S&P Global put Friday’s North Asia-West Coast rate at $6,500 per FEU, still gradually falling and at the lowest point since late June 2021. The gap with East Coast assessments has been widening since May, with the East Coast rates now 50% higher than West Coast rates.
“East Coast rates are significantly higher than West Coast rates due to the congestion we are seeing,” said Griffiths.
Matthew Cox, CEO of ocean carrier Matson (NYSE: MATX) explained on his company’s quarterly call earlier this month: “In fall of last year, we saw over 100 vessels waiting at anchor or offshore waiting to get into the ports of Los Angeles and Long Beach. We still have 100 ships waiting. But a lot of that congestion has moved into different ports. We [have] the same number of ships but just more distributed to different places.”
The number of ships waiting off all North American ports topped 150 in late July, according to an American Shipper survey of ship-position data from MarineTraffic and queue lists for Los Angeles/Long Beach and Oakland, California.
The count fluctuates by the day (and by the hour as ships enter and leave queues) and is now down 15% from its peak — but still historically high. As of Monday morning, there were 130 ships waiting offshore. East and Gulf Coast ports accounted for 71% of the total, with the West Coast share falling to just 29%.
The queue off Savannah, Georgia, was the largest at 39 ships on Monday morning. It was considerably higher just a few days earlier. According to Hapag-Lloyd, there were 48 container vessels off Savannah on Friday, with wait times of 14-18 days.
The queue off Los Angeles/Long Beach has now virtually vanished. On Monday morning, it was down to just 11 container vessels, according to the queue list from the Marine Exchange of Southern California. It hasn’t been that low since November 2020. It hit a high of 109 ships on Jan. 9.
On last Wednesday’s quarterly call by ocean carrier Maersk, CFO Patrick Jany said port congestion preempted a steeper drop in spot rates. Even with support from congestion, he predicted short-term rates will decline further in the months ahead.
“We have seen an erosion of short-term rates in the past few months that has been stopped here and there by renewed or new disruptions,” Jany said. “The erosion of the short-term rates will continue. It won’t be a one-day drop but a progressive erosion toward a lower level of short-term rates in the fourth quarter.”
Jany predicted that when rates stop falling, they “will stabilize at a higher level than they were in the past [pre-COVID] and higher than our cost level.”
During the latest quarterly call by logistics provider Kuehne + Nagel, CEO Detlef Trefzger predicted rates would ultimately settle at levels two to three times pre-COVID rates. A Seko Logistics executive made the same prediction during a recent briefing.
According to Cox at Matson, spot rates “are adjusting slowly. There’s no falling off a cliff. The word we use is ‘orderly.’ We’re seeing rates decline from their peak, but … we expect an orderly marketplace for the remainder of the year, with our vessels continuing to operate at or near capacity.”
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