Fundamentals are driving up shipping stocks, according to Jefferies' Randy Giveans.
In his Maritime Shipping Quarterly note released Wednesday, the analyst wrote that the Jefferies Shipping Index had shot up 16% since the start of 2019, despite a seasonal slowdown in the first quarter and early-year newbuilding deliveries.
"The fundamental backdrop and outlook for 2H19/2020 improved for most sectors, leading to significant increases in both asset values and time charter rates during the quarter," Giveans wrote.
For tankers and gas, Giveans forecasts demand driving rates up.
Both product and crude tankers saw rates decline during the first quarter, but fewer newbuilding deliveries and Opec increasing production should help crude while the IMO 2020 regulations kicking in next year will boost product tankers.
For gas, new liquefaction facilities coming online — including the Marine East 2 and 2x pipelines for LPG — mean good times ahead.
Giveans seemed less bullish on dry bulk and boxships. He wrote that he expects the bulker market to improve with the caveat of a list of "wildcards," ranging from Chinese iron ore inventories to trade tensions.
Boxships, he wrote, would be buoyed by economic growth in both the US and European Union.
Of the stocks Jefferies covers, Ardmore is up the most, 53.7% since the start of the year. The Irish tanker owner is followed by Frontline, up 41.4%, and Teekay LNG at 38.2%.
