The Dow Jones Transportation Average has slumped 11% since late March on fears of waning domestic demand. Container shipping stocks have been dragged down along with domestic transports.
Not so with commodity shipping stocks, which have very different drivers. Tanker, gas carrier and dry bulk shipping equities are heading up.
Shipping stock charts were awash in double-digit green numbers on Thursday, a day when the main indexes were in the red.
Tanker owners Tsakos Energy Navigation (NYSE: TNP) and Teekay Tankers (NYSE: TNK) hit fresh 52-week highs on Thursday. As did dry bulk carrier owners Genco Shipping & Trading (NYSE: GNK) and Golden Ocean (NASDAQ: GOGL). As did liquefied natural gas (LNG) carrier owner Flex LNG (NYSE: FLNG) and liquefied petroleum gas (LPG) carrier owner Navigator Holdings (NYSE: NVGS).
Numerous other commodity shipping stocks — but not container stocks — are on the cusp of new one-year highs.
Crude and product tanker stocks
The Dow Jones Transportation Average (DJTA) is down 9.9% year to date (YTD).
In contrast, shares of product tanker owner Scorpio Tankers (NYSE: STNG) are up 77% YTD. Shares of Tsakos Energy Navigation are up 68%. Nordic American Tankers (NYSE: NAT) is up 60%, Teekay Tankers 57%, Euronav (NYSE: EURN) 42% and International Seaways (NYSE: INSW) 41%.
Tanker spot rates have finally picked up in recent weeks. Clarksons Platou Securities put rates for modern-built Suezmax (1-million-barrel capacity) crude tankers at $45,300 per day, up 163% month on month. Modern-built product tankers in the MR class (25,000-54,999 deadweight tons) were the top performers, earning $52,400 per day.
LNG and LPG stocks
The Russia-Ukraine war has been a major positive for stocks of companies that transport, produce and regasify LNG. The sentiment is that Russian pipeline volumes will be replaced by seaborne volumes over time, a net positive for seaborne demand despite lower average voyage distance as more U.S. LNG goes to Europe instead of Asia. Shares of Flex LNG are up 36% YTD, shares of GasLog Partners (NYSE: GLOP) 30%.
In the LPG shipping sector, Navigator Holdings is up even more: 58% YTD.
Dry bulk stocks
Dry bulk stocks fell in early April along with domestic transport and container shipping stocks. They have since rebounded, despite very weak rates for larger Capesize (180,000 DWT) bulkers and moderating rates for smaller bulker categories. Genco is up 54% YTD. Eagle Bulk (NASDAQ: EGLE) is up 50%, Golden Ocean 47% and Star Bulk (NYSE: SBLK) 34%.
Container stocks
Unlike other ocean shipping segments, container stocks have fallen by double digits since the end of March.
They’ve been weighed by the same consumer demand fears that are hitting the transport index, and have given back much of their YTD gains.
However, to put the recent drop in context, container shipping shares have been the best-performing shipping equities since the onset of COVID. Just one example: On Thursday, stock of container-ship leasing company Danaos (NYSE: DAC) closed down 17% from its high on March 28. Yet it was still trading 16 times higher than it was in January 2020, pre-COVID.
Container-ship lessor stocks have fallen recently despite these companies boasting several years of contracted revenue booked at record rates, shielding them from exposure to a drop in consumer demand. They also have customers (the container lines) with record cash buffers, removing counterparty risk.
Ocean carrier shares have fallen further than ship-lessor shares. Zim (NYSE: ZIM) and Matson (NYSE: MATX) are down 6% and 3% YTD, respectively. Not quite as bad as the Dow Jones transport average, but close.
Carriers are exposed to near-term U.S. consumer demand via spot rates. However, roughly half their revenue is covered by long-term contracts that have already been largely negotiated for 2022 at record-high levels. Furthermore, spot rates are still extremely strong. According to Drewry, Shanghai-Los Angeles spot rates (excluding premiums) are more twice what they were at this time last year. They’re more than quintuple rates two years ago.
Container shipping lines reported the best quarter in their history in Q4 2021. Early indicators show that the first quarter of this year will either be a close second or another peak, depending on the carrier.
China’s Cosco recently disclosed that it expected Q1 2022 net profits of 27.6 billion yuan ($4.3 billion).
That’s up 79% from the first quarter of last year and not far below the 30.5 billion yuan record hit in Q4 2021.
Taiwan’s Evergreen disclosed monthly operating revenues through the end of March. Its Q1 2022 operating revenue reached an all-time high 170.8 billion New Taiwan dollars, up 90% year on year and up 10% from the previous high in the fourth quarter.
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