Drewry Maritime Equity Research News

DP World will partner with a Canadian pension fund in a $3.7 billion investment vehicle that primarily looks at brownfield projects in investment-graded countries, says Drewry Maritime Equity Research. The terminal operator will retain operational control of the fund with 55 percent stake, after seeding it with two west coast Canadian terminals (Prince Rupert and Vancouver). The pension fund Caisse de depot et placement du Quebec (CDPQ) will plough $640 million for the remaining 45 percent stake. Hence, the total start-up capital for the investment vehicle is $1.42 billion. DMER view: "We have earlier commented on DP World’s leverage that will not be able to support its ambition – 100m gross TEU capacity target by 2020.

The announcement that three Japanese shipping groups will merge their liner shipping businesses is further evidence of survival M&A sweeping the industry according to global shipping consultancy Drewry. This morning Kawasaki Kisen Kaisha Ltd. (K-Line), Mitsui OSK Lines (MOL), and Nippon Yusen Kabushiki Kaisha (NYK) announced their agreement, subject to resolution by the board of directors of each company and shareholder/regulatory approval, to establish a new joint-venture company and to integrate their container shipping operations. We had envisaged this happening in an update published in June 2016, (Drewry Maritime Equity Research…

Container shipping firms' annual costs have risen by a total $500 million due to new sulphur emissions regulations that have forced vessels to use higher cost fuel, the OECD said in a report on Thursday. Rising fuel costs will further hurt an industry already stung by overcapacity, low demand and falling rates. From January 2015, ships entering Emissions Control Areas from the Baltics to the North American coast had to switch to ship fuels with less than 0.1 percent sulphur content, from 1 percent, as part of a campaign to combat marine pollution. An even lower cap of 0.50 percent is planned for 2020 and it could add annual total costs of around $5 billion to $30 billion for the container shipping industry, the Organisation for Economic Co-operation and Development (OECD) report said.

Negative interest rates are hurting  shipping industry by delaying the consolidation wave so badly needed, Bloomberg reports quoting Nils Smedegaard Andersen, chief executive officer of AP Moeller-Maersk. He said that the monetary policy environment "means consolidation will be much slower because it's easy for banks to keep weak shipping companies above water". It’s the latest example of how negative interest rates are distorting markets and potentially even slowing growth. The policy has so far had limited success in reviving inflation while money managers in countries with negative rates are warning of the risk of asset price bubbles. With the unintended consequences potentially including a slower global shipping recovery, questions as to the policy’s efficacy are bound to persist.

Shipping freight rates for transporting containers from ports in Asia to Northern Europe have plummeted 78 percent this year, after posting another drop this week, a source with access to data from the Shanghai Containerized Freight Index told Reuters. Rates fell 6.9 percent to $271 per 20-foot container (TEU) in the week ended on Friday, the person said, down from $1232 at the beginning of the year. It was the second consecutive week of falling freight rates on the world's busiest route and current level is widely seen as a loss-making level for container shipping companies that transport everything from flat-screen TVs to sportswear from Asia to Northern Europe.

A merger between Hyundai Merchant Marine (HMM) and Hanjin Shipping remains a real possibility, says the London-based analyst firmDrewry, who has looked at how such a company will look like. The research firm said in its Container Insight Weekly previous merger talks between HMM and Hanjin were put to rest by the Korean government last year, but the debt situation in both companies was causing serious concern in local circles and could bring the companies back to the table. “A merger would propel both carriers from being on the peripheries of the Top 20 to the become the fourth largest operator in the world (before the merger of Cosco and CSCL into China Lines) with combined worldwide volumes of 8 million teu from a fleet capacity of just over 1 million teu…

Investors suffered massive wealth erosion in 2015, as share prices of dry bulk companies kept tumbling during the year, says Drewry Maritime Equity Research (DMER). DMER’s shipping index, which is based on the market cap of leading dry bulk companies, was down ~43% in 2015. Asset values failed to find a bottom with ship owners putting their vessels on the block in a bid to fix their balance sheets. Investors, enticed by cheap valuations, were caught on the wrong foot as stock prices breached critical support levels during the year. Devanshu Saluja, Vivek Shah and Rahul Kapoor, analysts at DMER stated, “We see no recovery in sight over…

All stocks under Drewry Maritime Equity Research (DMER)’s dry bulk coverage were down and recorded double-digit negative returns, taking cues from vessel earnings. The BDI shed its gain of the previous two months and nudged down 20% m/m in August led by a fall in the Capesize index. Capesize rates were adversely affected by ample tonnage and lacklustre demand from China. For example, spot rates in the Pacific region dived 30% due to limited enquiries from mining companies and the average daily earnings in the Atlantic rim also dropped ~34% on account of sluggishness in the Transatlantic iron ore and coal trade. Freight rates in other vessel segments were much stable, thanks to ECSA and US grain exports.

Bragging rights for the world’s largest container ship have changed hands four times in as many months and keep on shifting again, says a report in the Bloomberg. The megaships have come to dominate container shipping with astonishing rapidity over the past decade. The shift to larger ships was pushed along by the global financial crisis and rising fuel costs. Due to weak freight rates shipping lines tend to send as many goods as possible in a single voyage. Samsung Heavy Industries Co., the world’s third-biggest shipbuilder, is constructing four vessels capable of carrying 20,100 20-foot containers for Mitsui O.S.K. Lines Ltd. of Japan. Another two ships of the same size will be built by Japan’s Imabari Shipbuilding Co.

International Container Terminal Services Inc. (ICTSI) is considered one of the biggest risk takers amongst global container terminal operators. Drewry Maritime Equity Research (DMER) believes that the company is now showing signs of better risk management that will assist in its long term sustainability. The differential in expected container volume growth rates between the developed and emerging markets has led operators to focus attention on emerging market opportunities and seek to rebalance their portfolios. One of the key perceived negatives for ICTSI in the past has been the geopolitical risks associated in some of its investments in economies such as Pakistan, Syria and more recently in Iraq that can provide robust returns.

The container industry is a notoriously difficult sector to make any money in, but a few major lines have managed to avoid the red ink while others have toiled. Drewry Maritime Equity Research compares the performances of Asian companies OOIL and NOL for clues behind the varying results and the future direction that the most successful are likely to head. The last five years have been a stormy period for the global container shipping industry and have affected all big and small players alike. The industry’s boom period of 2003-2008 saw low debt, ample liquidity and healthy balance sheets.

Drewry’s weekly container insight report shows exits from the transatlantic and Asia-Black Sea trades demonstrate how Hanjin is prioritizing financial repair over global coverage. Drewry said cash-strapped Hanjin Shipping has recently announced to its customers that it will be leaving two unprofitable trade lanes. The South Korean carrier will cease taking slots on the Asia‐Black Sea Express (ABX) service of China Shipping, Yang Ming and Wan Hai, and from April / May will pull out of the transatlantic market…

Asian container liner finances are put under the microscope in a recent Drewry Maritime Equity Research report. It is a challenge to find an investable container shipping stock in the current environment. Most companies have seen their cash balances wither and total industry debt has more than doubled in the past five years to USD 100-bn. Drewry’s analysis of the financial health of the industry paints a grim scenario for the global container liners with financial health under severe strain and shareholder value eroded.

Drewry Maritime Equity Research takes a positive view on the global port sector thanks to an improved outlook for a global economic recovery, driven by areas of favorable supply demand dynamics. Container trade is predicted to grow by 4.7% this year and 5.7% next year, reaching 684 million teu by the end of next year, according to the latest forecasts from Drewry. Port capacity is only expected reach 994 million teu by 2014 increasing at a CAGR of 3.9% since 2011, which will nudge average utilization up to 69% in 2014 from 67% in 2011. However, there will be wide regional variations, leading to very different utilization levels across geographies.

Drewry launches new equity research business with DP World investment report. Drewry, the renowned maritime research and advisory firm, announces the launch of a new brand, Drewry Maritime Equity Research, to further expand its portfolio of specialist products and services. Drewry, which is FSA authorised, will use the Drewry Maritime Equity Research brand to produce investment reports on listed companies operating within the maritime industry, providing the market with a completely independent analysis that has been built using Drewry’s unique expertise and knowledge of the shipping industry. Each investment report will focus on a company’s operational and strategic position…