Shipping stocks appear to be re-entering a phase where signs of new outbreaks of the coronavirus will dominate their movements more than changes in charter rates.
That's the take of Jefferies lead shipping analyst Randy Giveans after a terrible week for the US stock market that brought shipping names down with it, following a resurgence of Covid-19 in many US states and new threats in China.
"Shipping stocks fell an average of 8.9% and followed the [broader market] much lower as concerns about a resurgence in COVID-19 cases gained traction, leading to concerns that the global economic recovery could falter," Giveans told TradeWinds.
Overall, 27 of the 30 listings under Jefferies coverage lost group on the week. The Dow Jones Industrial Average plummeted more than 700 points, or 2.85%, to its lowest level in about two weeks after several US states paused re-opening measures on new outbreaks.
The tanker companies covered by Jefferies shed an average of 9% and this could have logically been attributed to further softening in spot rates, with VLCC levels halving on the week.
"Concerns are growing about the excess of tonnage in the Middle East Gulf as OPEC continues its production cuts," Giveans said.
However, dry bulk owners lost even more at an average 10% even as Capesize rates approached $30,000 per day, continuing recent gains.
The other major sector, containerships, also fell by 6%.
The gas sector showed mixed results, with LPG carriers the only positive sector for the week with an 11% gain. However, LNG carriers went the other way with an average 10% loss.
"For the week ahead, we will be looking for signs of bottoming for VLCC rates while also looking for further momentum from Brazilian iron ore exports which could push capesize rates above $30,000 per day, marking one of the strongest one-month rallies in memory," Giveans said.
"All that being said, we expect shipping to continue to trade at a multiple of the broader markets, with positive global recovery news leading to outsized shipping gains, or ongoing Covid concerns resulting in further shipping weakness. In the near-term, macro market moves will be the name of the game."
As for individual listings, Dynagas LNG Partners had another strong weak with a 11.8% gain, behind only dry bulk owner Navios Maritime Partners at 12.3%. The only other owner in black numbers was Belgian tanker owner Euronav, inching up 0.5%.
The worst performance came from Navigator Gas Holdings with a 19.4% stumble, a selloff Giveans termed "overdone" after gains the prior week.
Despite the recovering dry market, four bulker owners fell to double-digit losses on the week. with Scorpio Bulkers the worst at 18%. Genco Shipping & Trading dropped 15.3%, followed by Eagle Bulk Shipping at 13.7%, Diana Shipping at 12.4% and Star Bulk at 11.4%.
