The good news is that shipping stocks seem to be more leveraged to a post-COVID global recovery than most other equities. The bad news is that shipping stocks seem to be more leveraged to mid-COVID global fallout than most other equities.
Shipping stocks sank across the board on Monday on escalating fallout fears. Yet again, shipping equities fell harder than the major indices. After an already painful year to date, shipping shares have yet to find a bottom.
“Look at a day like today,” Stifel analyst Ben Nolan told FreightWaves. “The equities are down a decent amount. On what news? It boils down to a real lack of conviction that the economic data we’re seeing here is real and permanent.
“Capital for shipping is transient. Either it’s there or it’s not. And right now, it’s not,” continued Nolan. “It doesn’t really matter what you think from a valuation perspective until there’s a catalyst to get people to want to look at it again.”
According to Jefferies analyst Randy Giveans, “It was a ‘risk off’ day across the board, especially in energy. On days like that, regardless of actual earnings and attractive valuations, oftentimes the baby gets thrown out with the bath water.”
Among the biggest shipping losers at the closing bell: Eagle Bulk (NASDAQ: EGLE) -24%; Pangaea Logistics (NASDAQ: PANL) -17%; Golar LNG (NASDAQ: GLNG) -15%; Danaos (NYSE: DAC) -11%; Scorpio Bulkers (NYSE: SALT) and Costamare (NYSE: CMRE) -10%; Diana Shipping (NYSE: DSX), Matson (NYSE: MATX) and Genco Shipping & Trading (NYSE: GNK) -9%; Star Bulk (NASDAQ: SBLK) and Frontline (NYSE: FRO) -8%; Teekay Tankers (NYSE: TNK) and International Seaways (NYSE: INSW) -7%; Safe Bulkers (NYSE: SB) -6%; and Scorpio Tankers (NYSE: STNG) and Nordic American Tankers (NYSE: NAT) -5%.
VLCC owner stocks
No matter which segment you look at, shipping stocks have fallen more than the broader averages amid the pandemic.
Webber Research & Advisory published a report in late April arguing that crude-tanker stocks could be a hedge against a global COVID relapse. If economies recover slowly, extending the duration of the floating storage drawdown, it should be a positive for tanker earnings and stocks, maintained Webber.
It hasn’t happened yet. So far, the drawdown of floating crude storage has indeed been slow. Data from Kpler showed that as of last week, 127 million barrels of crude were still in floating storage, down only 30% from the July peak.
Despite the slow drawdown, rates for very large crude carriers (VLCCs; tankers that carry 2 million barrels of crude) have been under pressure. Clarksons Platou Securities estimated that VLCC rates averaged just $19,000 per day on Monday, down 32% week-on-week.
According to data from Koyfin, year-to-date total cumulative returns for VLCC owner Euronav (NYSE: EURN) are down 16%, those of DHT (NYSE: DHT) are down 21%, Frontline 37% and International Seaways 48%. VLCC owner returns have been below the YTD returns of the S&P 500 since May (S&P 500 YTD returns were still positive, even after Monday’s selloff).
Other tanker stocks
The performance of other tanker stocks — including owners of smaller crude tankers as well as product tankers — has been similarly weak. Some much weaker than others.
NAT has been the outperformer. It did unusually well in April through June but is now down 18% YTD on a total-returns basis. On the other end of the spectrum, Teekay Tankers is down 53% and the biggest underperformer, Scorpio Tankers, is down 68%.
Dry bulk stocks
Dry bulk stocks are faring just as badly as tanker stocks. Total returns YTD are down 36% for Genco, 42% for Golden Ocean (NASDAQ: GOGLE) and 44% for Star Bulk. Scorpio Bulkers has been the biggest loser, down 80%.
Container-ship leasing stocks
Owners that charter container ships to liners are spotlighted in a separate special report by FreightWaves. These companies’ stocks have also performed poorly during the coronavirus — despite the fact that container-ship charter rates have rebounded all the way back to pre-COVID levels. Total YTD returns for the top players are down 32%-48%.
Gas shipping stocks
Finally, liquefied natural gas and liquefied petroleum gas carrier owners round out the sea of red for circa-2020 shipping stocks. As of Monday, YTD stock returns for the leading listed owners were down 17%-71%. Click for more FreightWaves/American Shipper articles by Greg Miller
MORE ON SHIPPING STOCKS: A lost decade for shipping shares: see story here. Shipowners with shares worth pennies rake in millions: see story here. Robinhood’s topsy-turvy Top 10 shipping stocks: see story here.