The outlook for Taiwanese dry bulk shippers will likely brighten due to Chinese steel mills’ iron ore restocking and improving industry fundamentals, Yuanta Securities Corp (元大證券) said yesterday.
Of the companies in the local dry bulk shipping sector, the brokerage named U-Ming Marine Transport Corp (裕民航運), Chinese Maritime Transport Ltd (中國航運) and Sincere Navigation Corp (新興航運) as potential key beneficiaries of the restocking and industry improvements because of their big exposure in the capesize sector.
U-Ming shares rose 1.76 percent yesterday, as Chinese Maritime stock jumped 6.3 percent and Sincere Navigation moved up 2.13 percent on the Taiwan Stock Exchange, versus the broader market’s 0.49 percent fall.
The three companies focus mainly on shipping bulk raw materials, such as iron ore, coal, grains and cement.
“While the recent capesize freight rate recovery is mainly driven by China’s iron ore restocking, we also believe that the demand and supply balance is improving for the capesize segment, which should serve as a positive longer-term catalyst,” Yuanta analyst Yvonne Tsai (蔡昀真) said in a client note.
Sincere Navigation vice president Lee I-Jen (李義仁) told the Liberty Times (the Taipei Times’ sister paper) on Tuesday that the high season is likely to continue through December.
“Things appear to be very busy for capesize segment in the second half this year in view of Chinese steelmakers’ restocking demand,” Lee told the newspaper.
The Baltic Capesize Freight Rate Index has rebounded sharply this month and is now 40 percent higher than its peak level of the year and 120 percent higher than the average level seen between last year and the first half this year.
“The rebound is much stronger than that recorded by other segments, such as panamax and supermax,” Tsai said.
She also said the improving market dynamics in the capesize segment, where demand is likely to outpace capacity growth over the next two years, would generate a positive long-term growth.
Yuanta forecast that annual fleet capacity in the capesize segment is to slow to 5.7 percent next year from 8.7 percent this year and down from the 15 percent to 20 percent per annum seen in the past four years. It also expects growth in demand for shipping iron ore and other commodities would stay steady at between 6 percent and 7 percent next year.
The Baltic Dry Index, a measure of shipping costs for dry bulk commodities, surged more than 5 percent yesterday to its highest level since December 2011, according to the London-based Baltic Exchange.