Dry bulk and LNG are set to be the top performing shipping sectors this year as crude tankers and LPG face multiple headwinds in the opening months of 2019, DNB Markets says.
Analysts led by Nicolay Dyvik made the call as they upgraded stock in Star Bulk Carriers and revealed their top picks for the year.
John Fredriksen’s Golden Ocean and Petros Pappas-led Star Bulk were identified as DNB’s favoured bulker names with the sector tipped to be the strongest this year.
Dyvik and his colleagues Jorgen Lian and Mats Bye expect capesize rates to climb by 8% on average to $24,000 per day in 2019.
The numbers are based in 0.7% fleet growth and a 3.9% boost in tonne-mile demand.
“We forecast China to respond to the escalating trade war (the US will raise tariffs on the $200bn tranche to 25%) with public infrastructure spending, which would positively impact dry bulk,” they said.
LNG stocks undershot the record-breaking spot market in 2018, with Dyvik, Lian and Bye explaining they are priced today “as if past six months did not happen”.
“We forecast that we are just at the start of a multiyear upcycle for LNG shippers,” the analysts said, highlighting Flex LNG and Golar LNG as their favoured picks in the peer group.
While tankers enjoyed a strong winter market, headwinds will come from reduced Opec production, with DNB stressing a second cut should not be ruled out.
“We see IMO 2020 as a positive catalyst, but with oil at $55/bbl, a second OPEC cut could be a negative catalyst,” the analysts said.
LPG owners are also expected to experience continued pressure on rates in the first half of the year, extending a difficult run stretching back to the start of 2016.
“The LPG stocks have seen many false dawns since Q1 2016 as rates have failed to break above cash break-even for a sustained period,” Dyvik, Lian and Bye said.
“In our view, rates consistently above break-even will be needed for shares to reprice, but that is less likely to happen in the first half of 2019.”
