Dry Bulk Sector (DNB Markets) - Upping the ante

The dry bulk market has tightened considerably over the past 12 months. Given the highly attractive supply backdrop, with a 5.6% orderbook-to-fleet ratio and limited willingness to order vessels despite considerable cash generation, we believe there is potential for strong returns and asset appreciation. Thus, we remain positive on the space and reiterate our BUY on all the stocks under our coverage.

Financing 2°C Shipping - Financial risk of future regulations

We have worked with KLP and other partners in the Green Shipping Programme to assess the risk for financial stakeholders in various shipping technologies within the VLCC, Capesize and 10k TEU container segments. We find: 1) relative attractiveness of short-dated assets with scrubbers; 2) high uncertainty among newbuild alternatives in an uncertain regulatory environment; 3) that current IMO targets seem within reach in our base case; and 4) that further tightening of regulations is needed to ali...

2020 Bulkers (Buy, TP: NOK113.00) - Atypical strength to endure

Ahead of the Q1 report, we have raised our 2021e EBITDA by 12% on Capesize’s atypical strength. China has driven demand YTD, as illustrated by elevated domestic prices for iron ore and steel, while thermal electricity generation has gained share and outpaced domestic production. We find the relative cost of freight supportive of TCE freight rates and expect the global GDP recovery to outpace the normalisation of Chinese growth rates for the rest of 2021e. We reiterate our BUY but have lifted our...

DNB Markets Shipping Conference: Decarbonisation takes centre stage

DNB’s 14th annual Energy & Shipping Conference culminated in yesterday’s shipping day. The main theme was decarbonisation of shipping, and its market impact today. Attendees included representatives from IMO and Trafigura, along with several shipping companies taking action towards ambitious decarbonisation targets. Also, the crude tanker and LPG panels both proved rather optimistic despite recent market lows.

2020 Bulkers Minor model adjustments

We have updated our estimates for the Q4 results. We do not consider these changes to be material, and we have not changed our BUY recommendation. We reiterate our NOK78 target price.

Dry bulk shipping (DNB Markets) - 2021e growth came early

Chinese coal and iron ore consumption have soared on higher than expected demand and industrial activity, thus prompting increases to our near-term rate estimates as the ramp-up we forecast throughout 2021 arrived early. Although declining, iron ore and steel prices remain strong, and an increasing gap between freight rates and iron ore prices bears promise for the shipowners. We reiterate our BUY on the dry bulk companies under our coverage.

2020 Bulkers Minor model adjustments

We have updated our estimates on the Q3 actuals and Q4 guidance. We now assume the index-linked vessels capture USD29k/day in Q4, giving a fleet-wide TCE of USD21.5k/day, slightly below Q3 while also just below the quarter-to-date guidance. We do not consider these changes to be material, and we have not changed our BUY recommendation or our NOK78 target price.

Good times ahead

We remain optimistic on dry bulk through year-end, and highlight the record-low orderbook, latent earnings power, and attractive valuation as reasons to buy into the space long-term. We expect the triple whammy to unwind and the recovery from a trade war, Vale’s dam breach and the Covid-19 pandemic to elevate freight markets. Golden Ocean remains our top sector pick.

Northern Lights

2020 Bulkers (Buy, TP: NOK75.00) - Strong dividend potential

A fairly uneventful Q2 saw 2020 Bulkers outpace the Capesize index due to its six fixed timecharters. Thus, we expect it to underperform in Q3 as rates have picked up. Monthly dividends are due to be reinstated from October, and we see strong DPS potential going forward. We reiterate our BUY, but have trimmed our target price to NOK75 (78).

Dry bulk shipping (DNB Markets) - Triple whammy unwinding

US-China trade tensions, Vale’s dam disaster and now Covid-19 have resulted in zero demand growth in dry bulk over the past three years. We believe these headwinds will abate sooner rather than later, and have upgraded the dry bulk stocks we cover to BUY (HOLD); Golden Ocean is our top sector pick, with >50% potential upside to our NOK50 (34) target price.

Eventful start to 2020

2020 Bulkers (Hold, TP: NOK55.00) -

2020 Bulkers (2020 NO, Hold) - (18 pages)

Shipping (DNB Markets) - Upgraded stocks in only two sectors

Shipping (, ) - Upgraded stocks in only two sectors (18 pages)

Dry bulk shipping (DNB Markets) - U-shaped hopes, but liquidity fears

We reiterate our HOLD recommendations on the dry bulk stocks we cover, and assume a U-shaped recovery, but believe liquidity could become a concern for some in Q4 unless rates pick up.

Shipping down to HOLD on virus

We are shipping analysts not virus experts, but we have been reading international press, WHO, the Lancet, JAMA and China CDC reports to assess the potential impact of on shipping. This is not a comprehensive study, but we are sharing what we have learned so far. In conclusion: we see short-term downside potential to shipping and have downgraded our entire shipping universe to HOLD.

Dry bulk shipping (DNB Markets) - A replay in the making

Golden Ocean is trading at exactly the same low share price as in Q1 last year and at the same NAV discount (due to the Vale dam incident in Q1 2019, and this Q1 due to the coronavirus sending Capesize rates below opex levels). Last year, rates below opex lasted three months, while we are now at 45 days, hence we believe it is time to BUY. That said, we are not as optimistic about 2020–2021 as we were last year.

SHIPPING: Phase 1 could increase tanker demand by more than 2%

In its Phase 1 trade document, China pledges to increase US exports of energy products by a total amount of USD18.5bn in 2020, then USD33.9bn, reaching USD52.4bn by 2021. Energy is defined as LNG, crude oil, refined products (including LPG) and coal. The value of US exports of crude, LNG and LPG in 2017 was USD6.7bn, of which two-thirds was crude. Assuming crude will account for 50% of the increment, US exports to China by 2021 could rise to 1.3mbpd. The pure substitution effect should see addit...

Shipping Summary (DNB Markets) - Decarbonisation could extend cycle (4...

Wallenius Wilhelmsen, Stolt-Nielsen and Flex LNG are our top picks for 2020, as our LPG and Tankers stocks have upside potential of only 4–7%. For further upside potential there, you need to discount a cycle extension.

2020 Bulkers Minor model adjustments

2020 Bulkers reported Q3 EBITDA of USD0.9m, in line with our forecast, and declared a DPS of USD0.055 (we had forecast zero). We expect strong dry bulk rates for Q1 2020, but a combination of weak demand, scrubber off-hire coming to an end in March, and speeds on the up make us less optimistic on rates thereafter. We have updated our estimates post the Q3 results, but do not consider these changes to be material, thus we reiterate our BUY and NOK95 target price.