The collapse of South Korea's Hanjin Shipping (OTC:HNJSF) are sending ripples though world supply chains, as manufacturers scramble for freight alternatives to the world's seventh-biggest shipping line.
Hanjin filed for court receivership after its banks decided to end financial support, and ports across the globe have refused entry to its vessels in what is traditionally the industry's busiest season ahead of the year-end holidays.
Shipping stocks are putting in some gains with dry bulk and gas/oil transportation companies participating in the rally.
28 out of the 35 stocks listed in the broad shipping category are higher. The catch-all Guggenheim Shipping ETF (NYSEARCA:SEA) is up 1.0%.
Brisk stock market gains in Asia this week have helped sentiment, while a spike in crude oil prices won't go unnoticed. The bigger issue for the long-term will be the delicate balance between shipping/tankers supply and demand.
Leading sector movers are Navios Maritime Partners (NMM +6.2%), Dorian (LPG +4.8%), Teekay (TK +4.2%), Navigator Holdings (NVGS +4.5%), Diana Shipping (DSX +3.2%), and GasLog Partners (GLOP +4.8%).
Notable movers in the shipping sector include DryShips (DRYS +3.1%), Danaois (DAC +5.6%), and Paragon Shipping (PRGN +1.6%).
Some names in the volatile sector has been trading off of developments in Greece even with many of the Greece-based companies deriving nearly all their revenue outside the nation.
On a broader look, the Baltic Dry Index is +21 to 874. The breakdown shows the Cape index is 1279 with a spot price of 9612 vs. 11,149 a year ago, the Panamax index is 1052 with a spot price of 8380 vs. 5432 a year ago, and the Supramax index is 767 with a spot price of 8021 vs. 7099 a year ago.
The Baltic Tanker Clean Index is 837 vs. 521 a year ago and the Baltic Dirty Index is 857 vs. 786 a year ago.
The Guggenheim Shipping ETF (NYSEARCA:SEA) is +1.43% on the day and -4.12% YTD.
Deutsche's Justin Yagerman looks to have made a prescient call (even if he was a bit early) back on September 13, when the analyst said capesize rates may have hit a "near-to-medium term peak."
Although rates rose to over $42,211/day by the end of last month, the trend has reversed course, with rates now sitting closer to $28K (or, some $10K less than when Wells Fargo's Michael Webber warned on the sector on September 30). The Dry Bulk Index is down to 1,878 from just over 2,000 when Webber made the call.
Dry bulk shippers are smacked following a sharp decline in capesize shipping rates for a third consecutive day.
Overnight, capesize rates fell 4.2% (or $1,598/day) to $36,425/day and have dropped 14% (or $5,786/day) in the last three days; panamax rates fell 0.3% (or $48) to $14,388/day, while supramax rates rose 0.9% (or $100) to $11,279/day.
The Dry Bulk Index fell 2.1% (or 43 points) to 2,003 overnight, but has doubled since Aug. 12, led by capesize rates which have climbed 245%, largely driven by higher iron ore shipments to China out of Brazil and Australia (Briefing.com).
Earlier: Wells Fargo cautious on recent dry bulk rally.
"After rising ~290% since 8/19 to $42,211/day, Capesize spot rates have declined ~10% to $38,023/day since Wednesday," analyst Michael Webber notes, adding that "despite the modest pull back ... rates remain ~235% above their Q2 average [and] 35% above Q4 forward agreements, which are off ~11% since Wednesday, while 2014/2015 FFAs are ~50-60% below spot rates."
Diana Shipping (DSX), Eagle Bulk Shipping (EGLE), and Genco Shipping (GNK) are all maintained at Underperform.
Dry bulk shipping rates are rising again: Overnight, capesize rates rose 5.2% (or $2,206/day) to $42,211/day, panamax rates rose 8.9% (or $1,144) to $13,989/day, and supramax rates rose 2.6% to $10,579/day.
Since Aug. 12, capesize rates are up 300%, largely driven by higher iron ore shipments to China out of Brazil and Australia, while panamax rates are up 87%, largely driven by coal activity and anticipation of a good amount of shipments from a bountiful U.S. harvest (Briefing.com).