Throughout October and November – a period of time when container shipping was smashing records while crude tankers suffered – Splash readers were invited to vote for which shipping sectors would perform best and worst in 2021. With more than 1,000 votes cast, our readers have, by and large, stuck with the status quo, believing current market dynamics will play out over the coming 12 months with containers remaining the best performers and crude tankers’ tough times continuing.
Armed with our readers’ thoughts we approached many of the world’s leading shipping analysts last month to put them on the spot, asking them for their best and worst sector picks for next year. What is clear from our analyst survey is that the shipping market fundamentals in general are in a far more hopeful position today than for the majority of this year – thanks to vaccines being rolled out around the world and the stunningly low global orderbook.
“I generally think 2021 could be a year of great opportunity for shipping investors,” argued Joakim Hannisdahl, the head of research at Oslo-based Cleaves Securities. “Looking ahead to 2021, the shipping industry has a much better view than looking in the rearview mirror at 2020. The supply picture is getting better and better, with most orderbook-to-fleet ratios at 20-year lows while the average fleet ages continue to creep higher,” said Randy Giveans, senior vice president at Jefferies. On the demand side, he says it is hard to think of a scenario where commodity demand in 2021 is worse than this past year, so Jefferies is predicting demand growth easily outpacing supply growth.
Jonathan Chappell, a shipping analyst with Evercore ISI, coined a football cliché in outlining how he sees 2021 panning out, suggesting it will be a game of two halves with tankers especially told to brace for a very tough first two quarters before the world can enjoy “some semblance of post-vaccine rollout normalcy”. J Mintzmyer, lead researcher at Value Investor’s Edge, said he is most interested in containership stocks in 2021, primarily because the current rate surge is bringing on one- to two-year or longer charter deals and counterparty risk has greatly abated, yet the stocks still haven’t surged yet. Supporting Mintzmyer’s box pitch was Dr Adam Kent, the managing director at UK-based Maritime Strategies International (MSI). “Perhaps the most spectacular and at first glance counterintuitive, given the headline macroeconomic backdrop, has been the levels to which the containership charter market has been able to reach in Q4 2020,” Kent said, going on to predict that the sector will continue to do well into 2021 at a time when supply chains and liner company networks are stretched to their limits, buoyed by strong demand and container box repositioning.
Many other respected names in shipping research are adamant that after many flat years 2021 is finally dry bulk’s moment in the sun. “Dry bulk is my top pick at the moment given the lowest orderbook versus fleet on record, which leads to net fleet supply growth of only 1-2% per annum,” said Hannisdahl from Cleaves. With no signs of newbuild ordering picking up, this low fleet growth could continue well into the middle of this decade, he argued, adding that Cleaves is expecting a strong rebound in demand in 2021, with Chinese consumption of rising iron ore exports from Brazil and Australia a major driver.
Burak Cetinok, head of research at Arrow, also believes the dry bulk sector will outperform tankers and containers in 2021. “China shows continued strength and now the rest of the world is catching up,” Cetinok said.