Archives for posts with tag: stock market

SIW1102News that the US stock market ended the year 29% up is pretty exciting. And shipping did even better, ending 2013 with the ClarkSea Index (covering earnings of tankers, bulkcarriers, containerships and gas carriers), 79% up on the end of 2012. But equity investors know that the big increase in stock prices, against the background of the fairly half-hearted US economic recovery, has something to do with the lack of alternatives. And shipping investors are justifiably concerned that the year’s positive developments are driven as much by money as fundamentals.

A Weak, Bleak Year

Shipping is a supremely volatile business and the increase in earnings is not as good as it sounds. 2013 was, on any reasonable appraisal, a bleak year. The ClarkSea Index spent most of it below $10,000/day, which is uncomfortably close to operating costs. The recovery, which started in late October, pushed earnings up to $17,141/day by year end, but the full year average was only $10,335/day.

Fundamentals Looking Better

Dig a little deeper and there are signs that although the fundamentals are edging are in the right direction, the market is not much closer to recovery than it was a year ago. Seaborne trade, the ultimate driver of the shipping cycle, grew by a healthy 3.8%, close to shipping’s 50-year average. Meanwhile the tanker and bulkcarrier fleet grew by 4.3%, a great improvement on the last 4 years (2009 8.4%; 2010 10.7%; 2011 10.4% and 2012 7.3%) and roughly in line with bulk demand. So although the fundamental supply-demand imbalance stopped growing in 2013, there is still no sign of a significant reduction. Freight statistics support this view. The 12-month moving average of the ClarkSea Index, a better indicator of the underlying trend, bottomed out at $9,131/day in the summer and has edged up above $10,300/day. An improvement, but not exactly a boom.

Markets in Recovery Mode

Cash rich investors were quick to respond to these improvements, and the result is not helping in the quest to reduce surplus capacity. Scrapping fell 31%; total new orders rose from 54m dwt in 2012 to 140m dwt in 2013 (doubling for tankers and trebling for bulkers); and asset prices edged up. All good for investor balance sheets, but not for the surplus. In the global economy the damping effect of the credit crisis seems likely to hang around for a while, despite the short-term recovery. In shipping the slow steaming surplus is out of sight, but not out of mind, at least for smart investors. Scrapping decreasing and bulk orders more than doubling is the recipe for a long second half. The ‘Fat Lady’ still needs to slim down a bit before she’s ready to sing. Have a nice day.

SIW1098This week US stock markets hit record highs with the Dow Jones Industrial Average exceeding 16,000 for the first time. In the shipping market average rates remain relatively low (see last week’s analysis of the Clarksea Index), but the strength of global equity markets and encouraging signs in certain shipping segments have helped to lift Initial Public Offering (IPO) activity to its highest level for 6 years…

Take to Market

Various factors influence the IPO “window” including investor views on the market cycle, prospects in specific market segments and global investor appetite. Our Graph of the Week shows the amount of capital raised by shipping IPOs over the past decade (limited to companies whose main activity is the ownership of cargo or passenger vessels). The line shows the half-yearly average of the Clarksea Index. The boom in shipping rates in 2004 was followed by a surge in activity in 2005, when 25 IPOs raised a total of $6bn. Over half of this took place on the New York & NASDAQ stock exchanges, with US and Greek owners accounting for 15 IPOs between them.

In 2006 the index dipped and public market activity slowed, but in 2007 the index climbed back over $30,000/day and we recorded 17 IPOs worth $8bn. Greek owners and US stock exchanges were prominent again, although in terms of value a larger share was raised by Chinese companies in Shanghai and Singapore.

Take Stock

In the wake of the global financial crisis, vessel earnings and IPO activity fell away dramatically and in 2009 we recorded only 2 new IPOs. Rates and activity picked up tentatively in the first half of 2010, but there followed 3 years of limited activity as the Clarksea Index dropped under $10,000/day. During this period LNG proved to be one of the few active sectors and 5 IPOs have been recorded in this sector since April 2011. Recently LPG has also attracted interest and 2 IPOs have been placed this week.

Take Interest

In September the Clarksea Index climbed back above $10,000/day for the first time in over a year and this, combined with the strength of the US investment market, has helped to generate more activity not just in the gas sector but also from owners in the bulker and tanker (particularly products) sectors. So far in 2013 we have recorded a total of 7 IPOs and a further 5 OTC (over the counter) shipping listings (potentially leading to full listings in Oslo or New York in the upcoming months). Combined these have raised a total of $2.2bn – the highest annual total since 2007.

Last week we invited readers to submit forecasts for the 2014 Clarksea Index competition. Investors are making their own judgements and seem to be showing some confidence, but will they be as accurate as our winner? Those wanting to track details of shipping IPOs, followons and bonds can do so through the “Transactions” section on our Shipping Intelligence Network.