LONDON : Drewry container equity index slumped 25.9% YTD 2022 (as of 15 July 2022), after recording a significant valuation gain of 79% and 133.7% in 2020 and 2021 respectively. Liner stocks started 2022 on a positive note but the global polycrisis originating from the decade-high inflation, tight liquidity and geopolitical crisis between Russia and Ukraine forced investors to look for safe heavens; as a result, equity markets fell worldwide, eroding the sector’s valuations.
Port and terminal operators: Rapid monetary tightening and decade-high inflation in major economies led investors to shun risky assets. As a result, equity markets worldwide plunged, and the port sector was no exception. In 2Q22, the Drewry port equity index slumped by 13.9%, which more than offset the gains recorded in 1Q22. Cumulatively, the index is down by 15.1% YTD (ending 15 July) with the Russia-Ukraine war and the sudden and rapid tightening of monetary conditions taking a toll on industry valuations. The share prices of Global/International terminal (GTO) operators declined on average by 14.7% YTD, significantly higher than the 5.6% decline posted by Regional terminal operators (RTO). Looking individually, barring HPHT and Liaoning ports the stock prices of all other sampled companies posted negative returns on a YTD basis.
Dry bulk shipping: In 2Q22, spot rates fell because of the Russia-Ukraine war, softening Chinese demand and rising inflation world over. These factors, coupled with fears of a potential recession, encouraged the bearish sentiment, which led the Drewry dry bulk equity index to plunge by 22.3% in 2Q22. However, it expanded by 14% YTD because of the 39% surge in 1Q21 as the global economy was on a recovery path after the pandemic shock and supply chain disruption. In 2Q22, the BDI also fell by 4.9% (down 3% YTD) and so did the key market indices such as Dow Jones Industrial Average which fell by 10.5% (down 14% YTD) and S&P 500 which fell by 16.8% (down 19% YTD).
LNG shipping: LNG shipping stocks are resilient despite global economic uncertainties, high inflation and geopolitical crisis due to the Russia-Ukraine war. Drewry LNG shipping equity index increased by 16.0% YTD as of 15 July 2022, outperforming S&P 500, which declined by 18.9%. High FSRU demand and charters’ desire to secure LNG ships amid the geopolitical tensions are driving LNG shipping demand.
LPG shipping: Stock prices of all three LPG companies under our coverage have strengthened YTD 2022 mainly due to a strong recovery in spot charter rates. Stocks of BW LPG (BWLPG), Navigator Holdings (NVGS) and Stealth Gas Inc (GASS) surged by 44.3%, 17.8% and 15.2%, respectively during this period.
Crude tanker shipping: Drewry’s crude tanker equity index gained 14.3% in 2Q22 as high spot earning of mid-sized tankers on key routes (the Black Sea and the Mediterranean region) coupled with rising asset prices supported stock prices of crude tanker companies. Europe’s attempt to reduce crude oil imports from Russia led to rerouting of seaborne trade, which will support demand and freight rates of mid-sized tankers in 2H22. Conversely, key market indices such as S&P 500 and Dow Jones Industrial Average declined due to increased uncertainty amid the Russia-Ukraine conflict, high inflation and fears of a potential recession.
Product tanker shipping: Drewry’s products tanker equity index continued its rally in 2Q22 and surged 66.2% as firm freight rates across vessel classes on major trading routes drove the stock prices of product tanker companies. Rising European imports from the Middle East, the US and India to replace the supply from Russia boosted the tonne-mile demand in the aftermath of the Russia-Ukraine conflict. The index has substantially outperformed key market indices such as Dow Jones Industrial Average (-11.3%) and S&P 500 (-16.4%) as high inflation in several economies and fear of potential recession are hurting investor sentiments.