Norway’s Cleaves Asset Management (CAM) is predicting much better things from bulkers next year.
Head of fund management Carl Synvis said that, apart from seasonal factors, there are no immediate triggers for the sector.
“However, in the longer term, we believe the supportive supply side will set the stage for a significant recovery in dry bulk, starting in the second half of 2024,” he added.
“The orderbook to fleet ratio remains low at 7%, and we expect net fleet growth of approximately 2.5% per annum from 2023 to 2025.”
CAM’s Cleaves Shipping Fund has 37.5% of its portfolio invested in tankers and 23.7% in bulkers.
Among the listed dry owners on the books are Star Bulk Carriers with 6.4% of the fund, Genco Shipping & Trading (5.9%) and Himalaya Shipping (4.3%).
The dry bulk market has exhibited volatility at lower levels so far this year, Cleaves said.
“We anticipate this trend to continue over the next eight to 12 months,” Synvis added.
Chinese steel production, which started the year strongly, is expected to decline for the rest of 2023. Steel production is projected to be capped at 2022 levels, and major Chinese mills have issued warnings about a challenging second half of the year, he explained.
Synvis believes the most attractive short-term aspect is the current 25% to 30% discount to net asset value for the dry bulk companies.
Taking into account the downward trend in asset values, Cleaves views now as being a favourable entry point to the sector.
“Looking ahead, we find dry bulk attractive and will be adding exposure to the sector in the second half of the year,” Synvis said.
A volatile stock market for shipping
Cleaves Shipping Fund logged a 28.8% rate of return in the 12 months to 30 June, its first complete year of operations.
Despite evidence of a growth slowdown and cautious statements from central banks, global stock markets performed well last month, the investment bank said.
But shipping equity markets experienced “significant volatility” in the first half of the year.
The year began bullishly, driven by positive news on China’s economic recovery and strong fourth-quarter reports from tanker companies.
“Freight rates increased substantially for oil tankers and dry bulk companies, leading to corresponding increases in stock prices,” Synvis said.
The fund achieved its highest monthly performance in February, with a gain of 13.8%.
“However, the shipping markets were subsequently negatively impacted by macroeconomic turmoil, including inflation risks, interest rate hikes and banking crises. These factors dampened the performance of shipping equities, resulting in declining stock prices until the beginning of June,” the fund boss added.
