Market Overview

Dry Bulk Shipping Update: JPMorgan Sees Global Supply Growth Falling Below 3%

Share:
Dry Bulk Shipping Update: JPMorgan Sees Global Supply Growth Falling Below 3%

  • The latest shipping numbers indicate surging capesize earnings rates.
  • JPMorgan expects supply growth will come in below 3.0 percent for 2016, but an increase in demand will also be needed to boost rates.
  • Capesize chartering activity was down 23 percent week-over-week, but remains 58 percent higher than a year ago.
  • In a new report, JPMorgan analyst Corrine Png shared all the latest global dry bulk shipping data. JPMorgan believes that supply growth will come in below 3.0 percent for 2016, but an increase in demand will also be required for higher rates. Here’s a breakdown of the key numbers investors should be watching.

    Latest Rates

    The latest weekly earnings for capesize vessels surged 69 percent to $10.3K/d, while panamax earnings declined slightly to $5.6K/d. The one-year capesize time-charter (TC) rate is now $8.1K/d.

    Related Link: JPMorgan Says China's Shipping Demand Fell Druing The Past Week

    Looking Ahead

    The forward rate curve indicates that rates will generally be higher in Q1 of 2016, with the possible exception of capesize rates. Forward freight agreements indicate capesize TC rates of $6.3K/d in Q1, $6.8K/d in Q2 and $8.4K/d in Q3. Panamax TC rates are projected at $45K/d in Q1, $5.4K/d in Q2 and $5.4K/d in Q3. Supramax TC rates are expected to be $5.1K/d in Q1, $5.9K/d in Q2 and $5.9K/d in Q3. Handysize TC projections come in at $4.5K/d in Q1, $4.9K/d in Q2 and $5.0K/d for the entirety of 2016.

    Global Demand

    Capesize chartering activity was down 23 percent week-over-week, but remains 58 percent higher than a year ago.

    According to the numbers, China’s shipping demand has softened, while the rest of Asia and Europe picked up the slack. In the most recent week, 69 percent of capesize vessels were chartered to deliver to China. The split on these China-bound vessels was 94 percent iron ore and 6 percent coal.

    Europe’s demand share came in at 10 percent, while the rest of Asia took 20 percent of demand share.

    Outlook

    Shipping investors are hoping that a bounce-back in rates will spur a rebound for stocks in 2016. Shares of The Guggenheim Shipping ETF (NYSE: SEA) are down 27.6 percent in the past six months.

    Disclosure: The author holds no position in the stocks mentioned.

    Image Credit: Public Domain

    Posted-In: Corrine Png JPMorganAnalyst Color Long Ideas News Econ #s Analyst Ratings Trading Ideas Best of Benzinga

     

    Related Articles (SEA)

    View Comments and Join the Discussion!

    Virtual Realty Could Increase Tenfold By 2020

    EXCLUSIVE: Relypsa Being Evaluated By 3-4 Potential Acquirers; Sanofi Seen As 'Natural Buyer'